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Midday Action, Jan. 31

Source:Optionetics.com Author:Jody Osborne Date:03/25/14 Click:

Stocks battle their way back to positive territory following slate of disappointing economic news. Earnings news continues to be mostly better than expected, although Amazon.com (AMZN) provided a disappointing outlook. Economic news included data on jobless claims, employment costs and personal incomes. Of course, focus remains on the Fed following their 50-basis point cut on Wednesday.

After initial gains following the FOMC announcement, stocks turned south and remained there at the close. Today, stocks initially moved lower, but have since garnered enough strength to move into the black. Jobless claims for the week ending

Jan. 26 soared to a level of 375,000. This was a gain of 69,000 and came in sharply ahead of estimates for a reading of 318,000. This news runs contrary to yesterday’s ADP report that show solid private sector payrolls gains.

In other economic news, personal incomes rose 0.5 percent with spending up just 0.2 percent. The core PCE index rose 0.2 percent, putting the year on year rate at 2.2 percent, which continues to be above the Fed’s comfort level. The Employment Cost Index showed a quarter to quarter gain of 0.8 percent. However, the Fed is more concerned with the slowdown in spending and sentiment.

In earnings news, AMZN saw its earnings double in the fourth-quarter, yet the stock is down slightly in midday action. The online retailer had a strong quarter, but the company provided an earnings outlook that was below analyst expectations. Starbucks (SBUX) is also seeing lower prices, off nearly four percent. The coffee retailer provided a plan to slow its growth as traffic slowed at coffee shops across the country.

Financial stocks are mixed today with bond insurer MBIA (MBI) up slightly in midday action, reversing a decline early in the session. The company reported a loss of $2.3 billion during the fourth quarter mostly because of the problems in the U.S. housing sector. On Wednesday, the stock suffered from analyst comments that MBI and Ambak (ABK) would report larger than expected sub-prime losses.

Shares of MasterCard Inc (MA) have risen sharply today, up nearly 13 percent. The credit card company reported earnings of 89-cents a share, well above estimates for earnings of 72-cents. Revenues rose 27.8 percent and the company has fared well during the housing downturn because the company only processes credit card transactions and doesn’t issue debt.

So far, the interest rate cut from yesterday has not provided a boost for stocks. This is partly due to remaining concerns about the economy, as well as gains seen heading into the announcement yesterday.

Jody Osborne

Senior Writer & Options Strategist

Optionetics.com ~ Your Options Education Site

Visit Jody's Forum

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