Traders seem eager to take any hint of bad news right now to sell off holdings particularly in overvalued technology, biotech and small cap stocks. Poor data from China seemed to be the latest excuse. But the focus is now firmly moving from global economic news to the first quarter 2014 earnings season which really gets going next week.
It was red ink all over the US market last night, with the Nasdaq Composite suffering the brunt of the selling with a drop of 130 points or 3.1%, its worst percentage fall since November 2011. The Nasdaq Biotech index fell 5.6%. The S&P 500 fell 39 points, or 2.1%, whilst the the Dow Jones Industrial Average dropped 1.6% or 267 points, to 16,170. The FTSE 100 is currently down 44 points to 6,598, making the UK index down 2.2% for the year to date.
After the incredible gains of 2013 we all knew that 2014 was going to be much, much tougher to generate decent investment returns. The last few years you could have done very well just putting your cash in index tracking funds, why bother with an expensive investment manager. Those opting for an ETF tracking the S&P 500 or the Nasdaq Composite would have been very happy indeed early in 2014. Now let’s see if the fund managers can deliver growth against the background of a falling market. Those that switched from developed to emerging markets in late February have done very nicely with a 3% gain over the last month, against a 2.4% drop in the S&P 500 since March 10th.
Chinese Premier Li Keqiang ruled out major stimulus despite disappointing economic data putting the country’s 7.5% growth target for 2014 seriously in doubt.
Li said that job creation was the government’ policy priority, telling an investment forum that it did not matter if growth came in a little below the official target of 7.5 percent, “We will not take, in response to momentary fluctuations in economic growth, short-term and forceful stimulus measures,” “We have set our annual economic growth target at around 7.5 percent,”, “It means there is room for fluctuation. It does not matter if economic growth is a little bit higher than 7.5 percent, or a little bit lower than that.”
The latest Chinese trade data on Thursday showed exports fell for the second consecutive month in March with a 6.6% drop versus the year before, the worst performance since 2010 and this followed an 18.1% drop in February. Imports also fell by the most in 13 months.
So I’ll be watching the Q1 2014 earnings season with interest over the coming couple of weeks.Overall expectations are pessimistic, with total earnings for the S&P 500 expected to be down -4.1% from the same period last year. Estimates for the first quarter have fallen particularly in automotive, Retail, Basic Materials, Energy, Consumer Staples. However, total earnings for the 26 S&P 500 companies that have reported results so far are up +12.3%, with 57.7% beating earnings expectations. JP Morgan and Wells Fargo report today.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
US earnings season – will it soothe nerves or add to the selling pressure?
Apr 11, 2014 at 8:20 am in Market Commentary by contrarianuk
Traders seem eager to take any hint of bad news right now to sell off holdings particularly in overvalued technology, biotech and small cap stocks. Poor data from China seemed to be the latest excuse. But the focus is now firmly moving from global economic news to the first quarter 2014 earnings season which really gets going next week.
It was red ink all over the US market last night, with the Nasdaq Composite suffering the brunt of the selling with a drop of 130 points or 3.1%, its worst percentage fall since November 2011. The Nasdaq Biotech index fell 5.6%. The S&P 500 fell 39 points, or 2.1%, whilst the the Dow Jones Industrial Average dropped 1.6% or 267 points, to 16,170. The FTSE 100 is currently down 44 points to 6,598, making the UK index down 2.2% for the year to date.
After the incredible gains of 2013 we all knew that 2014 was going to be much, much tougher to generate decent investment returns. The last few years you could have done very well just putting your cash in index tracking funds, why bother with an expensive investment manager. Those opting for an ETF tracking the S&P 500 or the Nasdaq Composite would have been very happy indeed early in 2014. Now let’s see if the fund managers can deliver growth against the background of a falling market. Those that switched from developed to emerging markets in late February have done very nicely with a 3% gain over the last month, against a 2.4% drop in the S&P 500 since March 10th.
Chinese Premier Li Keqiang ruled out major stimulus despite disappointing economic data putting the country’s 7.5% growth target for 2014 seriously in doubt.
Li said that job creation was the government’ policy priority, telling an investment forum that it did not matter if growth came in a little below the official target of 7.5 percent, “We will not take, in response to momentary fluctuations in economic growth, short-term and forceful stimulus measures,” “We have set our annual economic growth target at around 7.5 percent,”, “It means there is room for fluctuation. It does not matter if economic growth is a little bit higher than 7.5 percent, or a little bit lower than that.”
The latest Chinese trade data on Thursday showed exports fell for the second consecutive month in March with a 6.6% drop versus the year before, the worst performance since 2010 and this followed an 18.1% drop in February. Imports also fell by the most in 13 months.
So I’ll be watching the Q1 2014 earnings season with interest over the coming couple of weeks.Overall expectations are pessimistic, with total earnings for the S&P 500 expected to be down -4.1% from the same period last year. Estimates for the first quarter have fallen particularly in automotive, Retail, Basic Materials, Energy, Consumer Staples. However, total earnings for the 26 S&P 500 companies that have reported results so far are up +12.3%, with 57.7% beating earnings expectations. JP Morgan and Wells Fargo report today.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.