Has The Stock Market Become Dysfunctional?

Stock Market Today: Will Twitter Soar?

The stock market’s bull run http://www.todayhotstocks.com isn’t getting the respect it deserves, JPMorgan’s chief U.S. equity strategist, Tom Lee, said Monday. “This is a bull market people don’t like, don’t respect,” he said. “I think individuals, especially high-net-worth individuals, have huge cash positions. I just think that right now stocks don’t have any respect. I think there’s a feeling that the best way to make money is through fixed income or real return instruments.
Source: http://www.cnbc.com/id/101168070

“Our view remains that national home prices will continue to rise,” says Peter Newland of Barclays. “That said, this report may hint at the beginning of an easing in the pace of price gains.” As for third-quarter corporate earnings, they’ve been respectablebut nothing to write home about. Profit growth remains slow and steady. Third-quarter profit growth among S&P 500 stocks is expected to be about 4.5%, and companies are beating a low bar set by analysts, investors say. Still, some analysts say the overall market is reasonably priced, no matter how expensive a few sexy stocks appear. The S&P 500 trades at a reasonable multiple of 15 times expected earnings over the next 12 months.
Source: http://online.wsj.com/news/articles/SB10001424052702303618904579171502758867222

The stock climbed as high as $50.09 before closing at $44.90, up 73%. That values the company at more than $31 billion, which compares with Facebook’s market capitalization of $120 billion and LinkedIn’s $26 billion. INVESTORS: How you can get Twitter IPO shares (But should you?) The gains highlight how euphoria is returning to the tech sector, fueled by optimism about the potential for social media to grab a big share of the booming online advertising business. Facebook and LinkedIn shares are up at least 80% so far in 2013. Tech’s biggest stock pops Twitter’s 73% opening day pop doesn’t come close to the 10 largest first-day percentage jumps, all of which came during the dot-com bubble: Sponsored by Percent of stock increase Sycamore Net.CacheflowAkamai TechMarketWatch.comCobalt NetworksFree MarketsWebmethodsFoundry Net.Globe.comVa Linux “We’re entering a pretty extended period of optimism,” said Rick Summer, an equity analyst at Morningstar. “There is a lot of downside risk at these levels,” he added, referring to Twitter’s opening price.
Source: http://www.usatoday.com/story/tech/2013/11/07/twitter-stock-market-debut/3459711/

Sam Stovall, chief equity strategist at S&P Capital IQ told the LA Times that he didn’t think the market’s advance was in danger of being derailed but said “said investors are still a little bit nervous. USA Today blunted any bubble talk Wednesday by noting that the rising stock prices are based largely on company earnings and in anticipation of tomorrow’s Twitter IPO. Marketwatch also cited the positive earnings. In the absence of bad news, the path of least resistance for equities is up, Terry Sandven, chief equity strategist at U.S. Bank Wealth Management told Marketwatch. In a story headlined “Why the Dow Jones Had a Record Close Today.” Slate.com writer Sean Vitka penned, “The Dow Jones Industrial Average closed at a record today at 15,747. Theres really no good reason for the high, except that investors are expecting continued quantitative easing.
Source: http://www.examiner.com/article/dow-record-stock-market-soars-but-are-we-headed-for-a-bubble

Days of Stock Market Irrationality Numbered

While individual actors are rational (it’s imperative for companies to be lean, there is little reason to invest in new capacity when the demand for its products is not there, excess cash should paid back to shareholders, etc.), the end result clearly leaves a lot to be desired. In a follow up article, we’ll investigate what can be done to improve this situation. Source: Has The Stock Market Become Dysfunctional? Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha).
Source: http://seekingalpha.com/article/1806472-has-the-stock-market-become-dysfunctional

Best Stock Market Since 1997 Seen With S&P 500 Momentum

But as this was all happening, we saw the formations of very troubling trends in the fundamentals that drive key stock indices higher. Companies on key stock indices started to show corporate earnings that were nothing but an illusion. They fiddled with their corporate earnings via massive stock buyback programs and cost-cutting to make them look better. And as we now near the end of 2013, companies in key stock indices continue to do more of what they have been doing for a while: using financial engineering to make their corporate earnings look better. But the real gauge of how companies are doingif you cant trust their earningslies in their sales.
Source: http://smallbusiness.yahoo.com/advisor/days-stock-market-irrationality-numbered-172511846.html

gross domestic product is projected to expand 1.6 percent, almost half the rate of 2012, data and estimates compiled by Bloomberg show. Economists this month cut their growth forecasts for the fourth quarter to 2 percent from an earlier projection of 2.5 percent. GDP hasnt expanded faster than 3 percent a year since 2005 and wont achieve that pace until 2015, they say. Embedded Gains I just dont see the market having a reason as a whole to really go up a lot, David Pearl, co-chief investment officer at Epoch Investment Partners Inc. in New York , said in an Oct. 31 phone interview.
Source: http://www.bloomberg.com/news/2013-11-04/best-stock-market-since-1997-seen-with-s-p-500-year-end-momentum.html

Index futures as of 7:35 a.m. EST suggest a strong day on the stock market, with the Dow Jones Industrial Average (DJINDICES: ^DJI ) set to gain 83 points at the opening bell. That should keep markets hovering near their all-time highs, thanks in part to an earnings season that has seen most companies beat profit expectations. The Federal Reserve has also played a role in the Dow’s stellar 20% jump so far this year: The central bank has stuck with its stimulus program amid steady but unimpressive economic growth. With that bigger picture in mind, here are a few individual stock stories to watch for in today’s market.
Source: http://www.fool.com/investing/general/2013/11/07/stock-market-today-will-twitter-soar.aspx

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