Il Primo Ministro greco Lucas Papademos riceve l'approvazione del governo su tagli al bilancio che corrispondono al 7% del Pil nei prossimi tre anni e su una ristrutturazione finalizzata a ridurre di €100 mld gli oltre €200 mld di debito detenuto dai creditori privati, atteso il voto del parlamento • Standard & Poor's declassa il merito creditizio di 34 banche italiane tra cui UniCredit a BBB+ da A, Intesa Sanpaolo a BBB+ da A e Banca Monte dei Paschi di Siena a BBB da BBB+, S&P anticipa "una redditività decisamente debole per le banche italiane nei prossimi anni" • La produzione industriale italiana aumenta a dicembre +1,4% da novembre +0,3%, oltre le stime degli economisti +0,5%, anche se i dati del quarto trimestre -2,1% suggeriscono che la terza economia della zona euro è entrata nella seconda recessione dal 2009 • I Btp decennali salgono per la quinta settimana consecutiva, il periodo di recupero più lungo in oltre cinque anni, la prossima settimana il Tesoro vende €4 mld di buoni al 6% con scadenza 2014 • L'euro cala dal massimo di due mesi contro il dollaro, il mercato azionario europeo cala dal massimo di sei settimane e l'azionario Usa registra la prima settimana di perdite del 2012 dopo che i ministri delle finanze europee non hanno concesso il pacchetto di aiuto necessario a prevenire il collasso economico della Grecia

giovedì 22 dicembre 2011

Market Comment - December 22

(Marco Bonelli) Are a lousy quarter by ORCL and disappointing order data from EMR really negative for the market?

Short-term speaking (over the next couple of months), the continued revision of earnings estimates to the downside should be a positive as it aligns the consensus expectations closer to fundamental reality and at the same time even leaves room for earnings "surprises" in the Q4 reporting season (as estimates already dropped sharply over the last couple of months!)

Although fundamental concerns as a result of macro-economic weakness or deteriorating capital-goods investment should be taken seriously, weak demand shouldn't be a big surprise at all but at the same time calls for a renewed slowdown are way premature.

In ORCL's case, while "...trouble to close large deals..." and "...hardware transition..." are the usual crappy attempts to make a crappy quarter look and sound not as bad as the numbers suggest and "...lost revenues due to being "behind-the-curve" in cloud software..." carries a high degree of speculation, the real reason for concern is a broad IT spending weakness. This in itself is certainly a concern but at the same time, it's probably (way) too early to come up with any conclusions. It's worth to remember that software spending held exceptionally well during the recession and even fought the usual early-/ late-cycle spending patterns, so some slowdown in software spending doesn't necessarily call for a broad spending weakness. As usual there are also shifts [in spending] within the software sector and shifts within the technology sector. Semiconductors already went (and still go) through some tough times and weak demand, falling ASPs, high capacities and other production issues. TXN, INTC, ALTR, XLNX, LSCC and others (MU actually is the latest example to report a weak quarter) already warned for the current quarter, now the torch gets handed to the software players. At the same time, cloud computing, tablets and wireless for instance continue to be areas of strong growth; in other words, it appears a bit too impulsive to call for a broad-based IT spending slowdown.

Overall, almost all sub-sectors in the technology space trade around their lows from end of November and with that closer to the bottom of the old trading range from August, September. With quite a bit of bad news from the earnings-front over the last two weeks, you could argue that a lot of the news is somehow baked into the prices. Sure, the 11.7% implosion of ORCL stock price and corresponding 3.1% drop in IBM's stock price that contributed to 44 negative points in the Dow Jones could be seen as the famous exception to the rule. Both Nasdaq indexes initially gave up more than half of the gains from Tuesday, attempted to close the gap the opened up, broke again below their 100day MA but reversed sharply to the upside in the last two hours of trading.

Considering the drag from IBM, the closing of the Dow Jones (and all other major indexes) is even more impressive and sends a very positive signal for more strength coming up. The Dow Jones Transportation Index in particular resumed its relative outperformance that originally began on October 4 but took another leg up on December 14. (By the way, the performance of these highly cyclical names coincides with continued growth in car-loads, as shown in the weekly rail traffic data.) Market breadth was relatively strong through-out the day and turned to the positive during the afternoon.

One last word regarding market sentiment, which appeared a bit on the complacent side last week and which probably got another lift with the market rally on Tuesday. However, yesterday's weak opening on back of ORCL's dismal quarter apparently took a lot of steam out of the bullishness. Over the course of the morning, more and more cautious comments emerged, which also expressed sharply fading hopes for a year-end rally - in other words, a beneficial development for higher prices ahead!

Oh, by the way, economic numbers today were more or less a non-event (who cares about Q3 GDP growth?). The only meaningful statistic will be tomorrow's November Durable Goods Orders; until then nothing stands in the way for a follow-through rally!

Trade well.

(Marco Bonelli is the Managing Director of International for CL King & Associates in New York. The opinions expressed are his own)

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