The Star Online: Business
The Star Online: Business |
- Wall Street Week Ahead: Bears hibernate as stocks near record highs
- Rumble in the Wall Street jungle: Ackman, Icahn duke it out on TV
- IMF urges mid-term plan for Japan debt reduction
| Wall Street Week Ahead: Bears hibernate as stocks near record highs Posted: 26 Jan 2013 05:49 AM PST NEW YORK: Stocks have been on a tear in January, moving major indexes within striking distance of all-time highs. The bearish case is a difficult one to make right now. Earnings have exceeded expectations, the housing and labor markets have strengthened, lawmakers in Washington no longer seem to be the roadblock that they were for most of 2012, and money has returned to stock funds again. The Standard & Poor's 500 Index <.spx> has gained 5.4 percent this year and closed above 1,500 - climbing to the spot where Wall Street strategists expected it to be by mid-year. The Dow Jones industrial average <.dji> is 2.2 percent away from all-time highs reached in October 2007. The Dow ended Friday's session at 13,895.98, its highest close since October 31, 2007. The S&P has risen for four straight weeks and eight consecutive sessions, the longest streak of days since 2004. On Friday, the benchmark S&P 500 ended at 1,502.96 - its first close above 1,500 in more than five years. "Once we break above a resistance level at 1,510, we dramatically increase the probability that we break the highs of 2007," said Walter Zimmermann, technical analyst at United-ICAP, in Jersey City, New Jersey. "That may be the start of a rise that could take equities near 1,800 within the next few years." The most recent Reuters poll of Wall Street strategists estimated the benchmark index would rise to 1,550 by year-end, a target that is 3.1 percent away from current levels. That would put the S&P 500 a stone's throw from the index's all-time intraday high of 1,576.09 reached on October 11, 2007. The new year has brought a sharp increase in flows into U.S. equity mutual funds, and that has helped stocks rack up four straight weeks of gains, with strength in big- and small-caps alike. That's not to say there aren't concerns. Economic growth has been steady, but not as strong as many had hoped. The household unemployment rate remains high at 7.8 percent. And more than 75 percent of the stocks in the S&P 500 are above their 26-week highs, suggesting the buying has come too far, too fast. MUTUAL FUND INVESTORS COME BACK All 10 S&P 500 industry sectors are higher in 2013, in part because of new money flowing into equity funds. Investors in U.S.-based funds committed $3.66 billion to stock mutual funds in the latest week, the third straight week of big gains for the funds, data from Thomson Reuters' Lipper service showed on Thursday. Energy shares <.5sp10> lead the way with a gain of 6.6 percent, followed by industrials <.5sp20>, up 6.3 percent. Telecom <.5sp50>, a defensive play that underperforms in periods of growth, is the weakest sector - up 0.1 percent for the year. More than 350 stocks hit new highs on Friday alone on the New York Stock Exchange. The Dow Jones Transportation Average <.djt> recently climbed to an all-time high, with stocks in this sector and other economic bellwethers posting strong gains almost daily. "If you peel back the onion a little bit, you start to look at companies like Precision Castparts The gains have run across asset sizes as well. The S&P small-cap index <.spcy> has jumped 6.7 percent and the S&P mid-cap index <.mid> has shot up 7.5 percent so far this year. Exchange-traded funds have seen year-to-date inflows of $15.6 billion, with fairly even flows across the small-, mid- and large-cap categories, according to Nicholas Colas, chief market strategist at the ConvergEx Group, in New York. "Investors aren't really differentiating among asset sizes. They just want broad equity exposure," Colas said. The market has shown resilience to weak news. On Thursday, the S&P 500 held steady despite a 12 percent slide in shares of Apple after the iPhone and iPad maker's results. The tech giant is heavily weighted in both the S&P 500 and Nasdaq 100 <.ndx> and in the past, its drop has suffocated stocks' broader gains. JOBS DATA MAY TEST THE RALLY In the last few days, the ratio of stocks hitting new highs versus those hitting new lows on a daily basis has started to diminish - a potential sign that the rally is narrowing to fewer names - and could be running out of gas. Investors have also cited sentiment surveys that indicate high levels of bullishness among newsletter writers, a contrarian indicator, and momentum indicators are starting to also suggest the rally has perhaps come too far. The market's resilience could be tested next week with Friday's release of the January non-farm payrolls report. About 155,000 jobs are seen being added in the month and the unemployment rate is expected to hold steady at 7.8 percent. "Staying over 1,500 sends up a flag of profit taking," said Jerry Harris, president of asset management at Sterne Agee, in Birmingham, Alabama. "Since recent jobless claims have made us optimistic on payrolls, if that doesn't come through, it will be a real risk to the rally." A number of marquee names will report earnings next week, including bellwether companies such as Caterpillar Inc On a historic basis, valuations remain relatively low - the S&P 500's current price-to-earnings ratio sits at 15.66, which is just a tad above the historic level of 15. Worries about the U.S. stock market's recent strength do not mean the market is in a bubble. Investors clearly don't feel that way at the moment. "We're seeing more interest in equities overall, and a lot of flows from bonds into stocks," said Paul Zemsky, who helps oversee $445 billion as the New York-based head of asset allocation at ING Investment Management. "We've been increasing our exposure to risky assets." For the week, the Dow climbed 1.8 percent, the S&P 500 rose 1.1 percent and the Nasdaq advanced 0.5 percent. - Reuters |
| Rumble in the Wall Street jungle: Ackman, Icahn duke it out on TV Posted: 26 Jan 2013 05:47 AM PST NEW YORK: Two of the most prominent investors in the world, Carl Icahn and Bill Ackman, had Wall Street mesmerized on Friday as years of acrimony exploded into a bruising verbal scrap on live TV. Initially CNBC was only talking to Ackman, but then the cable TV station put Icahn on as well and all hell broke loose. The argument centered on nutritional supplements company Herbalife Ltd Icahn, 76, who has gone from feared corporate raider to activist investor in more than three decades of dealmaking, called Ackman, 46, a "liar" and "the most sanctimonious guy I ever met in my life." In a tirade that included expletives, Icahn said he would never invest with Ackman and predicted investors in his Pershing Square hedge fund would lose a lot of money on the Herbalife bet. U.S. news outlets have reported that Icahn has a long position in Herbalife, although he has not confirmed that. Ackman, who is usually much more restrained than Icahn when speaking publicly, got in a few verbal shots himself. Icahn "does not have a good reputation" and "is not an honest guy," he said. The altercation quickly became the talk of the financial world, both on trading floors and on Twitter. "I will never delete today's Ackman vs Icahn CNBC debate from my DVR. Even when DVRs are like Betamaxes, I'll force my grand kids to watch," tweeted Eric Jackson of hedge fund Ironfire Capital LLC. Business Insider Deputy Editor Joseph Weisenthal tweeted: "It's never going to get any better than what we just saw." The influential blog ZeroHedge called it the "Ultimate Hedge Fund Deathmatch: Icahn And Ackman As The Real Billionaire Husbands Of CNBC Going Wild." BusinessInsider held an online poll: "Who Won The Brawl Between Carl Icahn And Bill Ackman?" As of 5 p.m. New York time, 70 percent of the more than 1,800 people who voted declared Ackman the victor. Neither Ackman nor Icahn could be reached for comment after the CNBC show. Ackman has called Herbalife a "well managed pyramid scheme" that he predicted will collapse. Herbalife has denied the allegation. "On CNBC today, Mr. Ackman continued to misrepresent Herbalife," an Herbalife spokeswoman said on Friday. "Herbalife is a financially strong and successful company, having created meaningful value for shareholders, significant opportunities for distributors and positively impacted the lives and health of our consumers over our 32-year history." DECADE-OLD DISPUTE The genesis of their feud stems from a nasty contractual dispute involving a real estate company deal 10 years ago, when Ackman was running his former hedge fund, Gotham Partners, which he co-founded in 1993 with former Harvard Business School classmate David Berkowitz. After eight years of litigation, a court ruled in Ackman's favor and Icahn was forced to pay Gotham $4.5 million, plus interest. Indeed, the discussion on CNBC often had little to do with the merits of Ackman's view of Herbalife. At times, Icahn also feuded with CNBC host Scott Wapner, accusing him of "bullying" him when he was pressed on whether he had gone "long" on Herbalife shares. Icahn may have little to lose from the dustup given that he is simply managing his own money these days. Ackman, on the other hand, manages about $11 billion at Pershing Square, including money from many prominent institutional investors. Herbalife shares briefly surged over 5 percent when Icahn said during the row that Ackman, by going public with his big short position, would cause the "mother of all short squeezes" in the stock. A short squeeze is when short sellers are forced to cover their position, a move that pushes a stock higher. Ackman and Icahn's dislike of each other is well known in financial circles. Some of the tension stems from the fact they both specialize in the same game - taking big positions in companies and agitating for management changes. Ackman's bet against Herbalife is also being challenged by another big hedge fund player, Third Point manager Daniel Loeb, who has said he holds a big long position on the stock. - Reuters
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| IMF urges mid-term plan for Japan debt reduction Posted: 26 Jan 2013 05:34 AM PST Published: Saturday January 26, 2013 MYT 9:34:00 PMDAVOS, Switzerland: The head of the International Monetary Fund called on Saturday for Japan to put forward a medium-term plan to reduce its public debt after this week's bold monetary and fiscal stimulus measures. IMF Managing Director Christine Lagarde told the World Economic Forum in Davos: "Japan has made very important decisions. We are very interested in these policies. We would like them to complement it with a mid-term plan on how the debt would be reduced." - Reuters
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