D&D Note (5-8-2012)
The aftermath of the Greek elections are weighing heavily on global markets today. With no party having a majority the outlook for the country and Euro member is very uncertain. This all leads to investors now fearing that Greece could drop out of the eurozone. If Greece left the Euro and went back to the Drachma it is estimated the Drachma would be valued at half the Euro.
The US markets hit their lows for the day the same time European markets closed, then drifted up from there. The DOW (INDU) closed at 12,931.71 down 0.59%, the Nasdaq (COMP) finished at 2,946.27 down 0.39%, and the S&P 500 (SPX) ended at 1,363.71 down 0.43%.
European woes also hit American corporate earnings. McDonald’s (MCD) same store sales didn’t rise as much as expected (only 3.3% opposed to expected 5%). The food chain pointed to weak European sales and weak emerging market sales for not hitting estimates. The stock fell 1.96% on the day, breaking the 200 day moving average and was another big reason why the market sold off today.
Some gainers in the market today are some good defensive potential breakout stocks; Dr. Pepper Snapple (DPS) was up 1.93%, Hershey’s (HSY) was up 1.04%.
The big looser on the day was watch company Fossil (FOSL) which ended down a whopping 37.09% after reporting first quarter revenue that came in even below the lowest forecasts.
On days like today sometimes your best performers can be equities that remain flat on the day such as Indonesian companies; Jardine Cycles (JCYCF), PT Astra International (PTAIF), Golden Agri-Resources (GARPY), Gudang Garam (GGNPF), Astra Agro Lestari (PTABF).
Volatility is simply something investors need to be prepared for. Both to weather the storm and to take advantage of the storm. Large swings happening day to day should be expected. Don’t be surprised to see big down days (1-2%) followed by relief rallies like we had yesterday and then today.
It is those swings up and down which over time will lead to flat gains, hence a sideways correction. One issue is the lack of corporate earnings left to report to help drive the upward swings, now all the focus will be on Europe.
Oil and Gold continued to fall. Oil fell $1.47 to $96.47 a barrel. Gold fell $34.20 to end at $1,604.90. While Gold is below that key level of $1,613 it was good to see it sharply bounce off of $1,600. Now we’ll need to see how Gold trades in Asia tonight – already the metal is trending up now to $1,607.
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