A combination of weak economic reports and a warning of slow growth from the chief financial officer of the market leader Google (Nasdaq: GOOG) led to a rout on the final trading session of February. While the Dow Jones Industrial Average managed a monthly gain, heavy sales of Google drove the Nasdaq Composite into the red for the month.

Today, the Dow Jones industrial average closed down 104.14 or almost 1% to 10,993.41, the Standard & Poor's 500 index closed down 13.46 or just over 1% to 1,280.66, and the Nasdaq composite index closed down 25.79 or 1.1% to 2,281.39. The Dow rose 1.2% in February and 2.6% in the year to date, the S&P 500 gained just 0.04% in February, but had a rise of 2.6% for the first two months of the year, and the Nasdaq lost 1.1% in February but is up 3.4% since the start of the year.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by eleven to five on volume of 1.76 billion shares. On the Nasdaq, decliners topped advancers by 20 to 9 on volume of 2.15 billion shares.

While the S&P 500 has been flirting with 1300, its inability to do so could suggest choppy trading ahead in the short term. Most of the quarterly earnings are already out and the next Federal Reserve policy meeting is not until later in March, leaving the market without a big potential near-term catalyst.

U.S. consumer confidence, ended a three-month gaining streak in February, falling to 101.7 from a revised January level of 106.8. The expectations index fell to its lowest level since March 2003, to 83.3 in February from 92.1 in January.

The news of the day was from the chief financial officer of Google (Nasdaq: GOOG), George Reyes, speaking at the Merrill Lynch Internet conference, stating that growth in search engines is slowing, and the company would need to find other ways to boost revenue. The stock closed down $27.76 or almost 7% to $362.62. This news also affected Yahoo (Nasdaq: YHOO) that closed down $0.68 to $32.06, Earthlink (Nasdaq: ELNK) closed down $0.26 to $9.92, and ebay (Nasdaq: EBAY) that lost $1.22 to $40.06.

Goldman Sachs however, issued a research note stating that Reyes' comments were taken out of context and that its thesis, growth expectations and implied value of $500 for the stock remains unchanged. It further advised investors to buy Google (Nasdaq: GOOG) with 30% plus upside to the $500 implied value.

Surprisingly, stock of H.J. Heinz Co. (NYSE: HNZ) rose 27cents to $37.87 in choppy trade even as the company posted adjusted earnings and sales that fell short of analyst expectations. The food group also offered a full-year profit outlook below current Wall Street estimates.

In a new product offering, Apple Computer Inc. (Nasdaq: AAPL) unveiled an iPod hi-fi home stereo system that will sell for $349 and run on electricity or six D-sized batteries. Apple shares, which had risen as much as 2% ahead of the announcement, turned lower, and closed off 3.5% down $2.50 to $68.49.

Many Biotech stocks were affected by King Pharmaceuticals (NYSE: KG) that closed down $3.62 or 18.2% to $16.25, after the specialty drug maker reported fourth-quarter revenue and earnings per share that fell from a year earlier and missed expectations. Another newsmaker in the health industry was Hospira (NYSE: HSP) that closed down $7.34 or 15.6% to $39.70, after the hospital products maker reported weaker fourth-quarter earnings that missed forecasts due to lower-than-expected sales.

JPMorgan wants to give Citigroup (NYSE: C) a real run for its money by revamping its volatile investment banking operation. They expect higher trading revenues in 2006 and beyond as it takes an aggressive stance on hiring and shifts the focus to better capital reallocation and investments. It has had a strong growth in investment fees in 2005, up 12% to $4.1 billion, very close to the $4.5 billion recorded by Citigroup.

U.S. light crude oil for April delivery added 41 cents to settle at $61.41 a barrel on the New York Mercantile Exchange. The price of crude had slipped Monday and early Tuesday as concerns waned about unrest in Iran and how that might impact crude supplies from OPEC's No. 2 oil-producing nation.

Posted by Manuel Backus to The Markets at 08:51 PM | Permalink

Technical analysts around the world are increasingly utilizing moving averages to spot trends in stock price movement. Though not fairly accurate, trend analysis does help to somewhat decipher the expected movement in future stock price. Though there are several types and different time spans that can be utilized to plot these moving averages, the most commonly utilized ones include the 20, 30, 50, 100 and 200-day averages.

Each moving average provides a different picture about the expected stock movement. The rule of thumb being that the shorter the time span the more sensitive the moving average would be to price changes. Similarly, the longer the time span, the less sensitive the trend would be to sudden changes in stock prices.

I prefer to use the 50-day moving average as it generates a much less volatile and smoother line, which can be used to detect longer-term trend movements. Some analysts also prefer to utilize the exponential moving average especially for shorter time periods as it better helps to capture quicker changes.

USES OF MOVING AVERAGES

TREND SETTING - Though analysts can utilize the plotted moving average to interpret stock price movement in several ways, the general assumption behind all moving averages is that a stock trading above its moving average denotes a bull run, while a stock trending below its moving average is on the bear run, expected to move down even further. This type of an analysis does not help the investor to get in at the lowest possible price and out at the highest price, but helps to stay in line with the security’s price trend by buying shortly after the stock’s price hits a low and selling shortly after it has hit its peak. An example has been provided below:

As seen in the case of Sun Microsystems Inc. (Nasdaq: SUNW), the actual price of the company is moving more or less in line with its 50-day moving average. When the price is above the moving average, it is considered an opportune time to buy the stock as it is expected to move further up and vice versa.

FILTERING - Some analysts also utilize the 50-day moving average to set filters, which primarily helps to increase the confidence of investors about the trend indication. For example, a technical analyst would want to wait for a stock to move 15% above its 50-day moving average to be assured that the stock is signaling a bullish trend. Though this is would be recommended as a safe way of analyzing the stock, at times it could lead to missing of the best opportune time. 

CROSSOVER - Crossovers between trend lines are also being utilized increasingly to analyze stok price movements. The most popular method is to compare the actual stock price movement with its 50-day moving average trend. When the stock price movement curve crosses its 50-day moving average from above, a sell signal is generated and when it crosses it from below a buy signal is deciphered. At times, a crossover between the 50-day and the 200-day moving average is also seen. In this kind of a crossover, one always looks for a situation when the shorter moving average crosses through the longer one as the longer average is considered to be a more stable support level for the stock. Analysts have also been seen to confirm the bullish/bearish trend of the stock by a triple crossover, whereby the shortest moving average has to pass through the two higher ones to signal a strong buy indications. This has been illustrated in the case of Microsoft Corporation (Nasdaq: MSFT) below:

In this case the 50-day moving average crossover the 100-day and the 200-day moving average in the end of August 2005 signaled a strong buy signal. As demonstrated by the graph above, the stock did move at this time and almost touched a new peak. 

CONCLUSION

Moving averages have been recognized as effective tools for analyzing stock price movements for quite some time now. They can prove to be efficient and inexpensive tools for identifying and confirming trade signals. Though some analysts are of the opinion that the trend analysis are lagging indicators which try to project future movements based on past experiences, however I believe it is a better idea to move with the direction of the tend rather than against it.

Posted by Manuel Backus to Technical Analysis at 04:41 PM | Permalink

Generex Biotechnology Corp. (Nasdaq: GNBT)

Novavax Inc. (Nasdaq: NVAX)

BioCryst Pharmaceuticals Inc. (Nasdaq: BRCX)

AVI Biopharma Inc. (Nasdaq: AVII)

Hemispherx Biopharma Inc. (Amex: HEB)

Chiron Corp. (Nasdaq: CHIR)

Baxter International Inc. (NYSE: BAX)

Sanofi Aventis SA (NYSE: SNY)

Stories:

Small bird flu stocks soar on fear

Bird flu hype infects biotech

Posted by Manuel Backus to Stock Ideas at 07:37 AM | Permalink | Comments (1)

A pullback in crude-oil prices, strong earnings from Lowe's Cos. (NYSE: LOW) and an upbeat profit outlook from Verizon Communications (NYSE: VZ) enabled investors to shrug off weaker-than-expected housing data. This sparked a broad stock rally with the S&P 500 index closing just below a 4-1/2 year high.

Today, the Dow Jones industrial average closed up 35.70 or 0.3% to 11,097.55, the Standard & Poor's 500 index closed up 4.69 or 0.4% to 1,294.12, and the Nasdaq composite index closed up 20.14 or 0.9% to 2,307.18.

Market breadth was positive. On the New York Stock Exchange, winners topped losers by more than nine to seven on volume of 1.43 billion shares. On the Nasdaq, advancers topped decliners three to two on volume of 1.75 billion shares.

Certainly falling oil prices played a big role in the day's advance. Additionally, people think that the economy is doing well, there has been positive geopolitical news out of Iran over the weekend, and the fact that the market for the most part is between earnings reports and Fed meetings. It is evident from the housing data, that some slowing is currently taking place. Sales of new homes in the United States fell 5% in January to a seasonally adjusted annual rate of 1.233 million, the lowest in a year . Economists had been expecting home sales to remain level at about 1.27 million.

Some gainers today included Hewlett Packard (NYSE: HPQ) closed up $1.39 to $33.41, Microsoft (Nasdaq: MSFT) closed up $0.42 to $27.05, Caterpillar (NYSE: CAT) gained $0.80 to $73.50, and Intel (Nasdaq: INTC) closed up $0.16 to $20.52. Walt Disney (NYSE: DIS) gained $0.40 to $28.38, on news that Apple might try and buy out Disney now that Apple founder Steve Jobs has joined Disney's board and is its biggest individual shareholder. Stock of Apple (Nasdaq: AAPL) closed down $0.47 to $70.99. Lowe's (NYSE: LOW) closed up $3.78 to $69.30, after reporting higher-than-expected fiscal fourth-quarter earnings. Home Depot (NYSE: HD) closed up $0.82 to $42.45. Verizon Communications (NYSE: VZ) gained $0.25 to $34.06, after the company said that 2006 profits will narrowly beat analysts' current forecasts.

British utility National Grid (NYSE: NGG) said it will buy natural gas distributor KeySpan for $7.3 billion in cash plus assumed debt of $4.5 billion. Shares of KeySpan (NYSE: KSE) closed lower $0.65 to $40.76. In another news, Armor Holdings, which makes vehicle-armor and other security products said it would buy military truck maker Stewart & Stevenson Services for about $1.1 billion in cash. Shares of Armor (NYSE: AH) closed up $3.67 or 6.6% to $59.13, while shares of Stewart & Stevenson (NYSE: SVC) closed up $7.23 or 27% to $34.33.

Amongst losers, Advanced Energy Industries (Nasdaq: AEIS) closed lower by 7.1% at $14.49. Applied Materials (Nasdaq: AMAT) fell 2.1% at $18.40, Mattson Technology Inc. (Nasdaq: MTSN) lost 4.27% to $11.88, Asyst Technologies (Nasdaq: ASYT) closed lower 1.41% to $9.81, and Lam Research Corp (Nasdaq: LRCX) closed lower 3.11% to $42.39.

Easing of concerns about Iran potentially developing nuclear weapons and reports on progress in talks between Russia and Iran propelled the U.S. light crude oil for April delivery to fall $1.91 to settle at $61 a barrel on the New York Mercantile Exchange. Ample U.S. supplies and overall weakness in petroleum trading sent prices for the April contract to their lowest level in almost a year. Natural-gas futures closed more than 7% lower.

Posted by Manuel Backus to The Markets at 07:36 PM | Permalink

This week saw some positive economic indicators combined with some speculation of rising interest rates. The core consumer price index increased 0.2 percent as expected in January, although this core figure excludes energy, which rose five percent during the month. Nonetheless, the numbers are on target shouldn't cause too much concern over interest rates. Also this week, the Index of Leading Economic Indicators rose 1.1 percent, better than expected by analysts, foreshadowing a strong burst of growth in the spring.

On Thursday, Philadelphia Federal Reserve Bank president Anthony Santomero reported that the economy is moving along at a sustainable rate, inflation is contained, and the nation's monetary policy is precisely where it needs to be, again reinforcing that there should be no big surprises in Fed policy and interest rates in the foreseeable future. Santomero noted that the current three percent growth rate in the economy means a neutral monetary policy on the part of the Fed, implying that the tightening cycle is coming to an end. We note with interest however that on Tuesday, interest rates on short-term T-bills rose to the highest level in five years, at a three-month rate of 4.450 percent, the highest rate since 2001.

Besides energy, which has long been on the rise, one of the best long-term winners is the healthcare industry, and this week analysts predicted a 7.2 percent annual increase in healthcare costs over the next decade, with total healthcare spending in the US hitting $4 trillion by 2015. Tech stocks were up just slightly this week amidst gains by Cisco Systems (Nasdaq: CSCO) and Oracle (Nasdaq: ORCL). The resiliency of the tech market was evident as analysts downgraded Intel (Nasdaq: INTC) to market perform from outperform, but the stock nevertheless closed up 0.07 at end of trading today at $20.36.

The Dow closed lower than expected this week primarily due to some external, short-term effects, specifically, an attempted attack on a Saudi oil refinery, and a report about weak durable goods orders. Today, Commerce noted a drop of 10.2 percent in durable goods orders for January, primary due to weaker aircraft orders. The Dow, still above the 11,000 mark, closed down at 11,061.85, down $53 from last Friday's closing. The S&P 500 Index rose slightly over last week to 1,289.43, and the Nasdaq Composite Index also had a modest gain, rising over last Friday's close of $2,282 to close today at $2.287.04.

Posted by Manuel Backus to The Markets at 07:36 PM | Permalink

Investors were torn between worries about weaker than expected durable-goods orders and an attempted attack on a Saudi oil refinery on the one hand -- and a desire to take advantage of investment opportunities on the other hand. The Nasdaq rose and the broader market managed to stabilize after crude oil prices jumped 4% and a number of companies issued disappointing earnings outlooks.

Today, the Dow Jones industrial average closed down 7.37 to 11,061.85, the Standard & Poor's 500 index closed up 1.64 or 0.1% to 1,289.43, and the Nasdaq composite index closed up 7.72 or 0.3% to 2,287.04. For the week the Dow Jones Industrials fell 0.5% while the S&P 500 and Nasdaq Composite both gained 0.2%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers 19 to 12 as 1.43 billion shares changed hands. On the Nasdaq, advancers topped decliners by nearly 17 to 12 on volume of nearly 1.57 billion shares.

The good sign is that despite higher oil prices, the market ended the week on a positive and this positive momentum could likely continue into early next week. The next week is jammed with economic news such as reads on consumer confidence, new and existing home sales and manufacturing. Market participants seem to be counting on another quarter-point interest rate hike at the next Federal Reserve policy meeting. However, they remain confused about what will happen at the May meeting and when the Fed's rate-hiking campaign will end. Particularly strong or weak economic news next week could help provide hints.

It is evident that there are many cross currents in the market. Higher oil prices, and an economy that is doing fine which is leading the market to have difficulty in getting outside its trading range in the near term and probably will require an outside event to break out. There continues to be strong buying interest in many individual shares, but there also are significant money flows into mutual funds that short the overall market.

The Commerce Department reported a 10.2% plunge in durable-goods orders for last month, citing weak aircraft orders. This decline, the largest since July 2000, far exceeded the 2.5% drop expected by economists. Aircraft orders fell 68.2% in January after averaging more than three times the normal level from October through December.

Home builders are also growing concerned about an increasing number of cancelled new home orders, which could be a sign of an underlying weakness in the recent run in home prices. This could be the last warning sign that buyers who were turning to real estate as an investment, rather than for their own housing needs, are shifting out of real estate.

Amongst the gainers today, Research in Motion (Nasdaq: RIMM) closed up $4.52 or 6.5% to $74.05, after a judge hearing arguments in a patent case opted not to immediately shut down the company's popular BlackBerry e-mail service, as had been feared. eBay (Nasdaq: EBAY) closed up $0.26 to $41.49, Cisco Systems (Nasdaq: CSCO) gained $0.13 to $19.85, and JDS Uniphase (Nasdaq: JDSU) closed up $0.08 to $3.06.

Amongst losers, General Motors (NYSE: GM) closed down $0.60 to $19.99, Hewlett Packard (NYSE: HPQ) closed down $0.35 to $32.02, AT&T (NYSE: T) closed down $0.37 to $27.57, Dana (NYSE: DCN) lost $1.64 or 52% to $1.51, Merge Technologies (Nasdaq: MRGE) closed down $4.00 or 21% to $20.50, Gap (NYSE: GPS) lost $0.67 or 3.5% to $18.43, Nordstrom (NYSE: JWN) closed down $1.72 to $38.30, and H&R Block (NYSE: HRB) lost $2.18 or 8.7% to $23.01,after reporting lower quarterly earnings that missed estimates.

U.S. light crude oil for April delivery jumped $2.37 or roughly 3% to settle at $62.91 a barrel on the New York Mercantile Exchange, following reports that suicide bombers had tried to blow up a Saudi oil refinery. The attack was thwarted at the gates of the refinery. Nonetheless, concerns about global supply remained, following unrest and threats to oil supplies in Nigeria and Iran in recent weeks.

Posted by Manuel Backus to The Markets at 06:47 PM | Permalink

For the week ending February 17, the Dow ended at $11,115, up 1.8 percent. The S&P 500 ended at $1,287.24, up 1.6 percent, and the Nasdaq Composite Index ended at $2,282, up just under one percent. All three indicators, though up for the week, fell on Friday on speculation of further interest rate hikes and inflation, foreshadowing a bearish week ahead.

Despite dropping on Friday, the week was still exciting with the Dow exceeding the 11,000 mark and hitting a four-year high. The positive results are due in part to the tech sector coming in ahead of expectations. Positive results from Hewlett-Packard (NYSE: HPQ) set the pace for the tech sector after posting exceptionally strong profits, triggering its stock to hit a five-year high. Good results were seen throughout the tech sector last week, setting the stage for a strong comeback and making this an exceptionally good time to invest in tech.

Triggering Friday's decline was a report that the Producer Price Index (PPI) rose 0.3 percent in January, with core prices rising 0.4 percent, the highest gain over the past 12 month period. Although the increases are still nominal compared to previous inflationary periods, they are still ahead of what economists had predicted, a factor that triggered concern on Wall Street that the Fed would raise short-term interest rates. However, we will wait until next week's release of Consumer Price Index (CPI) numbers before looking for the Fed to take action.

As a counter-balance to the inflationary figures reported on Friday by the Labor Department, the Commerce Department also reported last week a seasonally adjusted 2.3 increase in retail sales, higher than expectations and at its strongest point since May 2004.

Much of the inflationary figure reported by the Labor Department is seasonal, and not high enough to send out any significant alarms--and so any bearish trends on Wall Street next week are likely to be very short-term.

New Fed chairman Ben Bernanke's first testimony last week was reassuring, with a positive forecast of robust growth and only modest inflation. However, the chairman did indicate that the relative strength of the economy may lead to the need for another round of interest rate increases to keep inflation in check. Overall, Bernanke's testimony caused no significant alarm, showed that his philosophy is strongly in line with that of his predecessor, and that no radical changes are in the cards.

Posted by Manuel Backus to The Markets at 06:24 PM | Permalink