Established in 1957, the S&P 500, also known as the Standard and Poor’s 500 Index, is a capitalization-weighted index of 500 large-cap common stocks. Capitalization-weighted means that the companies with largest stock market capitalization have the greatest impact on the value of the index. The S&P 500 is the second most widely followed stock market index in America after the Dow Jones Industrial Average.
A look at the charts makes me a bit nervous that the next stock market crash could be on the horizon. The fact is that the market has not witnessed a correction of any major proportions in excess of 10% since the stock market began to turn up in March 2009. Sure, we have had the occasional five-percent adjustments in stocks, but these periods of selling were short-lived, always followed by periods of buying support. I suspect we could be on the verge of another correction that could drive the major stock indices down to test their respective 200-day moving averages (MAs) after already breaching the key short-term 50-day MA. While we would all love to see stocks continue to creep to new record highs, this is not ... Read More
You can't blame newly installed McDonald's Corp. (NYSE/MCD) CEO Steve Easterbrook for not being enthusiastic about the fast food restaurant stock. I’m certainly not; you can see my negative view towards the seller of the “Big Mac” here. Even after Easterbrook's new strategy to turn things around, you can’t get angry at me for not getting too excited. (And then there’s YUM! Brands, Inc., which is looking pretty darn good in comparison—but more on that later.)
McDonald’s New Strategy Not Doing Much for OperationsWhat is McDonald’s doing to try to turn t ... Read More
I no longer own an “iPhone” and I don't have plans anytime soon to order the “Watch,” a smartwatch from Apple Inc. (NASDAQ/AAPL). Yet despite my personal needs, I do think Apple is the king of the mountain in the stock market’s technology space. Some are suggesting the iPhone will eventually meet its match, but I have yet to see this. Apple sold something like 74.5 million iPhones in its first quarter. This a huge number, and it could get even better if existing users of older iPhones decide to stay. I didn't; I switched to the “Samsung Galaxy,” which I feel is a comparable alternative to the iPhone. But this is not about my personal taste. The reality is that Apple ha ... Read More
Some say Alibaba Group Holding Limited (NYSE/BABA) is the Google Inc. (NASDAQ/ GOOG) of China. And that is currently the case at this juncture...until Google can gain a foothold in the country’s Internet technology sector. But that will not be easy. Comparing Alibaba to Google in the technology sector at this time is difficult. If we could fast-forward a few years, the answer to which Internet starlet is a better choice would likely be clearer. Google is currently nearly twice as big as Alibaba based on market capitalization. This on its own doesn’t mean that Google is superior; however, I will explain why I think it may indeed be the better choice now in the Internet technology ... Read More
Why the Restaurant SectorThis may be a surprise to you, but one of the top-performing sectors over the past few years has been the restaurant sector. While there has clearly been some euphoric buying, the fact that we are seeing stronger job growth and rising home wealth in the U.S. has helped as well. If you look at the chart of the Dow Jones U.S. Restaurants & Bars Index, you can see the upward moves, highlighted by several breakouts along the way, including the recent breakout from the sideways channel. I doubt the gains ahead will be as dynamic for the restaurant sector, but there will continue to be opportunities to accumulate stocks on price weakness.
While many seem to be comforted by continued stock market highs, bad news could be brewing for the first-quarter 2015 earnings season.
1Q15 Earnings Season to Affect the Markets?The stock market continues to see record after record. We had the NASDAQ breaking back above the psychological 5,000 level last Friday; now it’s within distance of its all-time high, but we are heading into the key first-quarter earnings season of 2015. Small-cap stocks, which had been the doormat in 2014, have regained their luster with a 2.4% advance in March, now sitting at a new record-high. Everything appears to be firing on all cylinders for the long side, but let me remind you ... Read More
Just the other day, I was talking to a friend of mine who seemed extremely cheerful. I asked why, and he said that his investments have performed well over the past few months and he saw no reasons to worry. This is a common problem with investor sentiment; people tend to become complacent and only look to the recent past as an indication of what tomorrow will bring. This is quite dangerous. Investor sentiment is often wrong and can be used as a contrary indicator, buying when others are dumping their stocks and taking profits when others are blissfully unaware of the changing land ... Read More
Every day it seems as though the S&P 500 makes a new high. This strong performance over the past year is creating complacency, as more retail investors are piling into the market. However, I would certainly urge caution, especially for any new capital being put to work at these lofty levels. With earnings season upon us, we’ve already seen several sectors in the S&P 500 get hit significantly, especially retail stocks. We keep hearing about resilience among Americans, but consumer sentiment is not as strong as many analysts believe. This is why I wasn’t surprised when retailers disappointed. One of ... Read More
As many of you already know, the gross domestic product (GDP) estimate for the third quarter came in above estimates at 3.6%, with most of the increase coming from higher inventory levels. But I would like to look at something slightly different than the inventory buildup. I think we are all aware of what happens when inventory builds and consumers don’t buy—corporate profits get hit. However, looking at the data a bit closer, there are more worrisome signs aside from excess inventory that are also pointing to tough times ahead for corporate profits. The S&P 500 has had a stellar run since its bottom in 2009. Part of the reason for this is that corporate profits have expanded t ... Read More
Well, that didn’t take long! Just a few weeks ago, I wrote an article stating that investors should begin to worry about the lofty level of the stock market. Since that time, the S&P 500 has dropped by more than five percent in less than two weeks. This market correction won’t be a surprise to my readers, as I have been suggesting investment strategies that can help prepare your portfolio for a large downswing in the market for some time now. When I wrote the article in late January, the S&P 500 was surging, even though the preliminary Thomson Reuters/University of Michigan index of consumer sentiment dropped month-over-mo ... Read More
Despite stagnant wages and increased borrowing, Americans ramped up their consumer spending in January. The United States Department of Commerce said earlier this week that consumer spending rose 0.4% in January versus a forecast of 0.2%. (Source: “Real Consumer Spending Rises in January,” Bureau of Economic Analysis web site, March 3, 2014.) Unfortunately, January’s boost in consumer spending wasn’t as broadly based as many were hoping. Spending on durable goods, which include cars, fell 0.3%, while spending on non-durable goods, such as clothing and food, fell 0.7%. Consumer spending on services increased 0 ... Read More