Coffee Sipping Big Board Stocks

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'Wow' stocks, and why Amazon's still a buy

MARKETWATCH 8:33 AM ET 10/24/14

Symbol Last Price Change
KBH 16.27up 0 (0%)
YHOO 42.6up 0 (0%)
FB 80.04up 0 (0%)
AMZN 313.18 0 (0%)
MSFT 45.02 0 (0%)
PG 83.23 0 (0%)
CL 65.05down 0 (0%)
APT 4.6 0 (0%)
VSR 3.28up 0 (0%)
AAPL 104.83up 0 (0%)
DRIV 17.38up 0 (0%)
BABA 94.45up 0 (0%)
QUOTES AS OF 04:03:11 PM ET 10/23/2014

Friday could be one of those "watch the Ebola headlines for an opportunity to sell" kind of day. We've been in this exact spot before -- but it's worth noting that the market has managed a rather amazing feat this week.

The S&P 500 (SPX) has now retraced more than half of its recent 9.8% pullback. And the latest AAII survey shows bullish sentiment is at its highest in eight weeks (h/t Bespoke Investments). Maybe that bullish sentiment is a tad overbaked, which time will tell.

If you can get past the headlines, it's worth looking at some plays with potential, says the Fly, who points out several on the iBankCoin blog. These are "real companies" with one-week returns of greater than 10% and market caps of more than $1 billion. Names you'll recognize: KB Home(KBH) , Xilnx (XLNX)(XLNX), a bunch of airlines -- AAL (AAL), Delta (DAL) -- Yahoo(YHOO) , Facebook(FB) . The full list is here, and it's pretty big and impressive.

"It's important that you know which stocks have performed best this past week; because when the market dips again, you're gonna want to go back to the well for another go," advises the Fly.

Jones Trading's Michael O'Rourke is a little apprehensive. He says sharp rallies such as have been seen recently -- big opening gaps higher for the S&P 500 in three out of five recent sessions -- are tantamount to a short squeeze. He notes the market has sliced through resistance at the 200-day moving average as if through a big stick of buttah.

Stock pickers may need to decide whether their holdings are being driven by individual fundamentals or "simply this week's rising tide, which happened to replace last week's falling tide," O'Rourke says.

"If one can attribute a sizeable portion to the macro tide, then a 7% equity market rally in as many days creates an opportunity for bottoms-up investors to access liquidity," he writes. But if the movements are indeed macro-driven, then as these relationships are exaggerated, it represents increased risk. "When these moves start to revert, the single stock players will have trouble finding liquidity," he says.

Do the bulls have control? Maybe that will be weighed out next week when the Fed will supposedly announce that QE has been wound down. The weekend is here and all could change -- ECB bank stress-tests, elections in Brazil and Ukraine, and Ebola, of course.

Or maybe, we're over-thinking things, as usual.

Key market gauges

Ebola headlines gave stock futures a scare in Asian hours. Things calmed dow, but now futures are once again pointing to a rocky start, with those for the Dow (YMZ4) and S&P (ESZ4) struggling and the Nasdaq 100 (NDZ4) being hit the worst. Japan's Nikkei nailed a weekly gain of just over 5%, while other Asia markets were mostly flat. Europe is pushing south too. Gold (GCZ4) is up slightly, while oil (CLZ4) is down again on a skittish investors pulling in on their horns a bit. The Russian ruble (USDRUB) is getting hit hard versus the dollar and euro on fears that S&P is going to hit it with a downgrade.

The quote of the day

"Anxiety is not good for economic activity, especially coming up to the festive holiday [season]" -- Song Seng Wun, head of research at CIMB in Singapore, to CNBC on why the New York doctor's Ebola diagnosis may freak out Wall Street a little.

The economy

New home sales for September is all we get as far as data for Friday. That's out at 10 a.m. Eastern. Property prices in China posted their first year-on-year fall in the sector. Shanghai and Hong Kong didn't react, but some are worried this is a little nail in the China-growth coffin.

Earnings

Amazon.com (AMZN) is down 10% in premarket. The company posted a wider-than-expected loss, as its investments continue to hit the bottom line. Investors are fed up.

Microsoft (MSFT) is up nearly 4% as the company easily topped estimates on big demand for Office, Surface and Xbox. Here's a MarketWatch recap of that analyst call.

Ford (F) has posted a profit fall, but has beat forecasts. Shares are going nowhere right now. include Procter & Gamble(PG) is up a bit after its results, while UPS (UPS) isn't moving much either after reporting. Colgate-Palmolive(CL) (CL) is up 2% after estimates topped profits.

If you're riding the Ebola-stock rollercoaster, then it's up again this morning after news of the New York doctor who has been diagnosed with the dreaded virus. Lake (LAKE) and Alpha Pro Tech(APT) are up 18%. Versar(VSR) is up 12%.

The buzz

Watch Apple(AAPL) this morning. Shares closed at a record high of $104.83 on Thursday. That's the 10th record close of 2014 and the stock's first record close since Sept. 2.

Digital River (DRIV) is up 48% in premarket after a buyout offer from an investor group led by Siris Capital for $26 a share in cash.

Alibaba (BABA) is looking to expand its entertainment content on the Internet via Hollywood, reports Bloomberg.

Twitter's (TWTR) top female exec opened up about overcoming adversity and discrimination.

The call of the day

Don't give up on Amazon(AMZN). That's the message from Chad Bartley at Pacific Crest. He pushed his price target to $435 from $460 on back of those results, but stuck to an outperform rating. Overall, third-quarter sales, earnings and metrics were pretty disappointing, with poor demand for the Fire phone not helping matters, but...

"We remain bullish on this year's holiday season, and think growth trends will benefit from easier year-on-year comparisons and increased delivery capacity," he said. Adjusting out currencies, which could be a big $640 million year- on-year headwind in the fourth quarter, the high end of revenue and adjusted operating income guidance still look pretty good, said Bartley.

He's also more optimistic Amazon(AMZN) can stabilize its margins in 2015, forecasting 1.5% operating margins, versus 1.8% in 2014, after years of declines. All in, he says take advantage of weakness and buy the shares.

Hey, after all, Bezos is the best CEO in the world.

The chart of the day

Gold is undervalued. It's been said before and now it's being said again, this time by Alastair Macleod writing for PeakProsperity His lengthy post has plenty of charts to make his case, but this one stands out.

The chart shows how much gold has fallen in real terms versus fiat money -- currency that's declared legal tender by a government, but which isn't backed by a physical commodity, such as the dollar. Macloed says with gold trading around $ 1,200 an ounce recently, it's down about 41% in real terms from July 2008 -- "extreme undervaluation" -- he writes.

Think about this, he says: The U.S. dollar is the reserve currency and its government bond yields are the benchmark for global fiat money risk-free return. "Governments with a demonstrably (much) worse borrowing record have been able to issue bonds at what amounted to a yield backwardation -- significantly lower than the U.S. 10-year Treasury bond. This has never happened before, so far as I'm aware," he writes.

Random reads

No selfies at crime scenes. Even, Anderson Cooper knows that, but he couldn't reason with this Canadian TV reporter.

"People say everyone has a gift," O'Neill joked. "And mine happens to be chatting with men." How this male Secret Service agent snared a hacker.

A reason to fly Air New Zealand.

A petition to bring back the "Breaking Bad" toys is halfway there.

Need a nap-break and nowhere to go? Let's hope Cochilo comes to your town.

Fantastic news for the poor of Madrid. Goldman Sachs is your new landlord.

Twenty-five years later, balloons instead of bullets in Berlin.

Accidentally got on a plane. What's your sick-day excuse?

Need to Know starts early and is updated until the opening bell, but to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at about 7 a.m . Eastern.

-Barbara Kollmeyer; 415-439-6400; [e-mail]

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10-24-140833ET
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