The bulls are trying to power ahead following Monday’s pullback and got off to a good start despite more shaky comments from across the pond. Today’s rhetoric comes from German Chancellor, Angela Merkel, who said he was opposed to increasing the size of Europe’s bailout fund. The current ESM (European Stability Mechanism) has $500 billion euros which isn’t enough to cover Spain and Italy if they were to default. We have mentioned before if the EU can get this to $1 trillion it would do wonders for the market.
Here at home, Retail Sales were no help as they were up only 0.2% versus estimates for growth of 0.5% for November. Retail Sales less autos were also up 0.2% compared with forecasts for a 0.4% rise for the month.
Best Buy (BBY, $24.85, down $3.23) is down 12% after disappointing Wall Street with its quarterly numbers. The company reported a profit of $154 million, or $0.42 a share, versus $217 million, or $0.54 a share, for the year ago period. Revenue came in at $12 billion, up from $11.9 billion, for the same period. The suit-and-ties were looking for $0.52 a share on $12.1 billion.
We thought this could be a turnaround quarter for the company but they haven’t done anything exciting and continue to disappoint. Our chart work from the weekend showed Best Buy nearing resistance and an earnings beat could have gotten shares past $30. However, with the 10-cent miss, shares appear headed to the low $20’s where it still might not be a “Buy”. In other words, the company’s Best days could be over until it reinvents itself.
In IPO news (initial public offerings), Jive Software (JIVE, $15.00, up $0.03) priced 13.4 million shares at $12 and is showing a nice pop in its first day of trading. This is one of the “better” IPO’s coming public this week and, believe it or not, there is already takeover chatter surrounding the company.
Jive has a unique user platform and could be a good fit for IBM (IBM, $193.43, up $1.25), Microsoft (MSFT, $25.99, up $0.48), Oracle (ORCL, $31.32, flat) and SAP (SAP, $56.78, down $0.51), according to one analyst.
Elsewhere, one brokerage firm, Sterne Agee, couldn’t wait for Zynga (Proposed Ticker: ZNGA) to come public. The stock will make its debut on Friday, but they decided to jump the gun and initiated coverage of the stock with an “Underperform” rating. Yikes!
We will keep you updated on some of the other IPO’s coming out this week but we won’t be able to trade options on them until 2012 and they will be expensive. We aren’t sure if these two IPO’s will make our Watch List, but as you can see, analysts have already penciled in different expectations for the companies going forward.
As we continue to churn through this trading range, we are staying patient until we get the “all clear” sign from the bulls, or the bears. The upside resistance targets we have outlined or downside support levels we have gone over will come into play soon.
We will be adding some new option trade candidates to our Watch List tonight as we get ready for our next new batch of trades and we will be listing both call and put options. For those of you just joining us, stay patient as well.
As far as today’s action, the Dow is currently up 77 points to 12,098 while the S&P 500 is higher by a six-pack to 1,242. The Nasdaq is up a deuce to 2,614. Subscribers, check the Members Area for the updates.