D&D Note (5-10-2012)
Today the cloud got hit and hit big due to Cisco’s (CSCO) downbeat forward looking guidance resulting in a 10% decline in the equity. As a consequence equities tied to the cloud got hammered such as; EMC (EMC), Salesforce.com (CRM), F5 Networks (FFIV), Riverbed Technology (RVBD).
While Cisco reported bad guidance does that necessarily mean all those other stocks will have the same issues? Not likely all of them, but some could. D&D saw this as an opportunity to scoop up additional exposure to one of our favorites EMC. Salesforce.com also entered into the buy zone but at a P/E ratio of 1,504.9 (where as the market average is a P/E of 13 times future earnings) the stock is still a bit pricey even after falling 9% on the day. If we see further weakness then it might become a suitable target, as the stock is up 33% YTD.
America did see some positive signs to the job market with a bit of a dip in jobless claims from last week with the weekly report falling 1,000 to 367,000, but needless to say we still have a long way to go in terms of unemployment.
The DOW (INDU) did finally break the 6 day loosing streak ending up 20 points, the S&P 500 (SPX) gained 3 points, while the Nasdaq (COMP) lost 1 point due to the cloud selloff.
Oil also reversed course gaining 27 cents to close at $97.08 a barrel, but most likely we will still see downward pressure on the commodity.
Gold rebounded rising $1.30 to close at $1,595.50 an ounce, but still keep a close eye on the metal and if it can’t get back above $1,600 on Friday it might be best to cut losses and stop out and look to reposition after we get the May jobs number.
The 10-year note did fall today pushing yields up to 1.88% (yields in treasuries work in inverse to price).
Overall uncertainty remains in the markets with a case being made for either a 15% gain by year end or a 15% decline. After looking at historical data and historical trends there is still more of a bull case than a bearish one.
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