Market Recap: Economy, Stocks and Oil
Economy
Every time the Feds speak, you can pretty much guarantee the market will behave in a volatile fashion. Judging from Mr. Bernanke’s comments as he delivers his regular updates to Congress on the state of the economy, interest rate will likely remain unchanged the next time the FOMC meets. In our view, this is probably the most logical choice given there is little evidence to support a rate cut. Inflation also appears to be in check so there’s no reason to tighten. This “Goldilock” economy should provide stability in the equities market.
Stocks
Apple Inc. (AAPL) is down almost 5 percent after reporting a blowout quarter. The company absolutely blew away their numbers, exceeding even the most aggressive forecast. There are many theories for the decline in AAPL’s share; some speculated future guidance did not meet analyst’s expectations. Others believed their Mac sales were not good enough. We believed it’s none of that. This is pure profit taking. The stock has climbed 25% in three weeks and smart investors are simply taking money off the table. The conservative guidance is nothing new at AAPL. If anyone follows this stock, they have always been conservative, which is not necessarily a bad thing. Let’s hope the stock drops further so we buy more of AAPL. We believed the iPhone is going to be another hit.
Oil
Oil continues to decline after the government reported larger-than-expected inventory of crude and gasoline. The price of oil feel below $50 per barrel briefly, this hasn’t happen since May, 2005. While the price of oil has dropped, the price of gasoline remains high. The price might be dropping a few cents at the wholesale level, but the price at the pump is still relatively high. This is why we continue to like Valero Energy (VLO). In fact, VLO just announced they’ll be increasing their dividend by 50 percent. Trading below $50, we believed this is an attractive stock. The drop in oil is only temporary, wait until the spring; we’ll be wishing we had more of those excess oil inventories as price will likely be in the $60 per barrel again.
