Daily Market Update – February 6, 2014 (Close)



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Daily Market Update – February 6, 2014 (Close)

Today’s big stories were likely to be inconsequential as far as anything will ever go.

Twitter and Green Mountain Coffee Roasters were grabbing all of the headlines in the morning, which wasn’t necessarily a bad thing, as we awaited tomorrow’s Employment Situation Report.

Why anyone was surprised over the market’s response to Twitter’s earnings report is amazing. No one had any right to expect anything other than some sort of a surprise, unless the market had fully already understood Twitter and had fully discounted all possibilities. Considering that Twitter was a black box even after its IPO and considering the absence of support levels due to its rapid rise in share price, anything could have been possible as earnings were released.

What is surprising is that user engagement is already decreasing. To me it’s also surprising that they have any revenue to report at all, as many have already figured out how to get their commercial Tweets spread through the system through viral campaigns, like the supposed drunken JC Penney Tweeter during the Super Bowl.

Green Mountain is a different story.

It has a long history of making large earnings related moves and it also has a history of either delaying scheduled earnings or releasing some big news that deflects from attention to earnings related detail. Not to mention allegations of accounting irregularities and some questionable activities by its founder and past Chairman and CEO.

In this case, I think there’s a second overlay, as well, as Brian Kelly, the new and untarnished CEO of Green Mountain struck a deal with Coca Cola, his alma mater. He had been a rising star there, named as President and CEO of Coca Cola Refreshments. No small feat.

I wonder if this deal was one of Coca Cola emulating Microsoft when it made its Nokia deal in an effort to secure a potential CEO successor and bringing Stephen Elop, the Nokia CEO and a Microsoft alumnus, back home.

In that case there was also an element of Microsoft sending a lifesaver in Nokia’s direction and given Green Mountain’s core business growth Coca Cola may have done the same.

Today, I’d rather see the market’s engaged in discussing and analyzing these issues than over analyzing what tomorrow’s data may be or trying to guess what direction the market may go in response to the data.

Also, hopefully the European Central Bank’s policy statement this morning will either be a non-event for us or a net positive, as late in the week adverse news is hard to overcome when contracts expire the very next day. In the recent past the ECB has usually sent our markets higher as they’ve followed an accommodative policy, as had our own Federal Reserve.

Interestingly, as our markets have reached that 5% pullback level and we’re nearing the end of earnings season more attention is being placed on government and other economic reports. The response to Monday’s ISM is an example of a response that has otherwise been really muted for the past year. For the most part the only items the market has cared about during the bull run higher have been the FOMC minutes and the Employment Report.

That may be changing as we become used to the idea of a continued taper and as some political dysfunction shows sign of abating and leaving us with fewer manufactured crises.

If we can get a decent employment number tomorrow, and the ADP data yesterday gives some hope for that, suddenly there appears to be less reason to expect a further drop in markets and I’m beginning to feel some optimism going forward.

Based on the way today’s market went, optimism was the call of the day.

That optimism would really take hold if we could also see volatility maintained at this level or even higher. Instead volatility for the broad market decreased, while for some individual stocks and sectors it remains at its recent highs, in fact, even higher than just yesterday. A good example of that is in the retail sector where suddenly good results from L Brands and Kohls have sent this week’s premiums rocketing higher compared to yesterday.

Today, as yesterday, I was looking for possible DOH Trades as well as any early rollovers,  as I wasn’t expecting much exciting to happen and certainly wasn’t expecting an unbridled march higher.

As would happen nothing exciting did happen except that was enough to send the market nearly 200 points higher.

The speculation is that today’s rise was in expectation of tomorrow’s employment numbers which are thought to be spectacular, perhaps in the 300,000 range or more and that the unemployment rate is going to come in at 6.5%.

For those keeping track, 6.5% was one of the thresholds that we were told the FOMC had set when deciding whether to initiate the taper program. Reportedly Janet Yellen prefers a 6% level, so in some wild scenario it could be conceivable that the next FOMC would have announcement of a slowing or postponement of the taper. If the market believes that may be the case today’s gain could vanish.

The speculation about the fun never ends.












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