Daily Market Update – May 15, 2014 (Close)
The morning could have been a disaster with both Wal-Mart and Cisco reporting disappointing earnings, especially since yesterday was a triple digit loss and had no silver linings to spin.
But Cisco proves that if you’ve done something wrong its just better to come clean and maybe people will be less upset with you. Maybe they might even compliment you on your honesty and forthrightness. At least no one will be disappointed when you live up to your lowered expectations.
In this case everyone was whispering that Cisco was going to report really bad numbers. Instead, Cisco reported really bad numbers, but just not as bad as they said they would be.
That’s the sort of thing that gets you rewarded.
Wal-Mart on the other hand reported its fifth straight quarter of decreasing revenues and profits. There was no really good way to spin that sort of thing.
While there’s no good way for the company to explain its results those looking to spin the data can always say that Wal-Mart’s falling revenues are simply a sign of the shift away from the low end of retailing as people are going back to work and have more discretionary income.
Sounds good, except Macys revenues are down, so too are Kohls. No one shops at Sears and people stayed away from Target for a while after their credit card breach, so one has to wonder where all of that discretionary money is going. If the belief that Wal-Mart is home to lower end consumers is accurate you wouldn’t likely believe that this afternoon’s report from Nordstrom’s would show it to be the beneficiary of shoppers moving away from Wal-Mart.
Amazon? You wouldn’t know it from the stock price lately.
At some point someone will be asking about that big disconnect between retail and the belief that economic growth is taking place and is the underpinning for an ever rising stock market.
At any rate Cisco and Wal-Mart appear to be balancing one another out in the pre-open trading and the market wasn’t showing much follow-through to yesterday’s sell-off, although it dis have a negative bias.
I was hoping that the market would either stay trendless this morning or move higher so that the monthly option cycle can come to a respectable conclusion. The pre-open futures were flat, but the minute the opening bell rang the market just headed lower and lower, making yesterday look like a rally by comparison.
After yesterday’s sell-off it just got a little more difficult to get respectable, but there’s always tomorrow, especially if Janet Yellen infuses some more Federal Reserve hand holding sentiment into the mix. this evening. While I’m not counting too much on the positive impact of her words after trading hours, there’s always the possibility if she does say something monumental.
Although that can cut both ways, as we’ve also seen that an occasional intemperate use of words can frighten or confuse investors. After today’s sell off it may be more plausible that Yellen might look to say something of comfort to help lift spirits.
With that potential uncertainty in the equation, where possible I was looking for any potential rollovers today, rather than tomorrow, as there are a fair number of positions set to expire. But with pricing heading lower it was relatively expensive to do the rollovers, especially with forward premiums still so low.
Looking at potential trades today I felt as if I would rather take my chances with lots of new uncovered positions next week rather than get very little premium in return for encumbering them for the week, especially since there really was little reason for yesterday and today’s declines.
So far this has been an extraordinarily slow trading week. Fortunately there were ample rollovers and assignments from the previous week to fuel my profligate spending and ways this week, but now the hope returns to where it always does on Thursdays and Fridays, only not as hopeful as it usually tends to be.
Maybe tomorrow there will be a little more intellect ruling trading than emotion. If not, next week will be a long one and likely to have as little activity as this week.