Updated from 7:23 p.m. with information about the European Council's treaty, the economic data, and expectations for Broadcom
NEW YORK (
) -- Folks took a lot of money out of stocks in 2011.
According to data released Monday by the
, mutual funds investing in stocks saw outflows of $130.3 billion last year, more than three times the outflows of $36.7 billion in 2010. In fact, despite the 20% or so rally in the
since early October, there were outflows of $28.8 billion in December 2011 alone. That's some serious profit-taking.
Tobias Levkovich, chief U.S. equity strategist at Citigroup, said Monday long-term mutual fund flows illustrate the tremendous shift in investor psychology that's gone on since the late 90s.
"From 1997 through 2000, individual investors poured a stunning $775 billion into US-oriented equity mutual funds while adding almost $50 billion to bond funds (despite $55 billion of outflows in 1999 and 2000)," he wrote in a research note to clients. "In contrast, investors have yanked nearly $400 billion from domestic equities since 2008 while adding more than $760 billion to bond funds over the same time frame. Hence, incredible risk tolerance by retail investors has shifted to stunning stock market revulsion."
Gold and bonds have been the big beneficiaries of this shift, but Levkovich thinks the gold vs. equities trade "looks very stretched" right now, and that investors choosing bonds with the 10-year Treasury still yielding less than 2% is "fascinating and odd."
"Admittedly, the country's safe haven status has attracted investor interest but buying a real money loser day one seems highly unusual," he said.
The major U.S. equity indices have come a long way off the March 2009 lows (the
Dow Jones Industrial Average
has gained more than 90% since closing at 6547 on March 9, 2009) but the bull market has been stalled -- yet incredibly volatile -- since the summer with Europe's debt problems moving to the fore just as the Fed's last quantitative easing program, QE2, ended in June.
At current levels, the Dow is still down 1.2% from its 52-week high in late April, so the market is nearing some resistance. January's rally has the
, up 4.7% so far in 2011, off to its best start since 1997, according to
S&P Capital IQ
, but the move has come with low volumes that are indicative of faint conviction. And the buying is flagging as the month draws to an end.
The Dow, which is still waiting for its second triple-digit swing of 2012, is now down in five of the past six trading sessions, while the S&P 500 has lost ground in four of the past five. And be warned, February is historically one of the cruelest months for stocks. The S&P 500 is down 0.3% on average since 1945.
"February is a cold month for temperatures and stock performances," wrote Sam Stovall, chief equity strategist at S&P Capital IQ. "Since 1945, the S&P 500's performance in February was second worst only to September's. As a result, the S&P 500's average return in February ranks 11 of 12, which is not surprising since the November through January performance for the market is the strongest three-month period of the year and is therefore in need of a rest."
Given that retail investors aren't really participating (at least through mutual funds),
that institutional investors have been carrying the load. With earnings just so-so and Greece still a big, fat question mark, the smart money may be tired of being all alone on this one.
As for scheduled news, the quarterly reports will keep coming in bunches this week. Tech/retail heavyweight
reports its fiscal fourth-quarter results after Tuesday's closing bell, and the average estimate of analysts polled by
is for earnings of 19 cents a share in the December-ended period on revenue of $18.2 billion.
The holiday selling season is huge for Amazon, and it's expected that the company did some deep discounting to drive top-line growth. Wall Street is looking for net income of just $81.6 million in the fourth quarter, up from $63 million in the third quarter when revenue totaled $10.9 billion, even though revenue is seen rising more than 70%.
Amazon has missed the consensus earnings view in two of the past three quarters, including a big 40%-plus shortfall in the third quarter when its per-share profit of 14 cents came in a dime below the average analysts' view. At that time, the company forecast revenue of $16.5 billion to $18.7 billion for the fourth quarter.
Despite the tight margins, which are partly the result of the company reportedly selling the Kindle Fire at a loss in hopes of profiting later on customer content purchases, and the rocky track record on earnings, the stock is up more than 15% in the past year, although it's come down more than 25% since hitting a 52-week high of $246.71 on Oct. 17, just ahead of the third-quarter report.
Wall Street is mostly on board with Amazon's strategy with 25 of the 40 analysts covering the shares at either strong buy (13) or buy (12) vs. 14 holds and one sell. The median 12-month price target sits at $240, implying potential upside of 30% from Monday's regular-session close at $192.15.
There's plenty of room for the stock to fall if the company didn't execute in the fourth quarter as the shares are trading at an eye-popping forward price-to-earnings multiple of 102X. The 52-week low of $160.59 dates back to last March.
Goldman Sachs previewed the quarter on Friday, and while the firm is above consensus with its forecast for earnings of 20 cents a share on revenue of $18.6 billion, it sees some risk ahead for Amazon.
"Overall, given currency and potential for greater deceleration in international sales growth as a result of Europe (similar to that reported by AXP, EBAY, GOOG), we see the potential for downside to expectations as we believe the market is looking for overall results to come in above the high end of the guidance range," the firm said. "We note that our view is despite our higher-than-consensus Kindle and Kindle Fire unit shipments, which we believe will help drive North American sales."
Goldman, which has a neutral rating on the shares with a $190 price target, is expecting Amazon to guide for revenue of $12.6 billion to $13.6 billion in the first quarter, which would represent top-line growth of 28-38%. The firm thinks Wall Street's consensus margin view of 1.9% for 2012 is currently too high, and that the stock could fall to attractive levels once this becomes clear. Goldman is modeling for GAAP operating margins of 1.3% for the year.
"We believe the level of investments needed to continue to grow Amazon's fulfillment footprint as well as its enterprise and consumer cloud offerings will cause a reset in margin expectations in the near-term," the firm said, adding later: "When coupled with our view of how Kindle Fire can help drive Prime adoption and generate incremental margin, we would view a reset in expectations as a buying opportunity."
Check out TheStreet's quote page for Amazon for year-to-date share performance, analyst ratings, earnings estimates and much more.
Tuesday morning features quarterly results for two Dow components,
ExxonMobil surrendered its market-cap crown to
last week after the iPhone maker's blowout quarter, and it's a long shot that the oil giant will be surprise Wall Street sufficiently to spark a comparable rally. The average estimate of analysts polled by
is for a profit of $1.95 a share in the company's fiscal fourth quarter on revenue of $119.7 billion.
Shares of ExxonMobil are up 6.4% in the past year, and based on Monday's close at $85.49, they've bounced 27.5% since scraping a 52-week low of $67.03 on Aug. 9. Sentiment is mixed ahead of the report. Of the 24 analysts covering the stock, 13 are bullish at strong buy (6) or buy (7), and 11 are bearish at hold (9) or underperform (2).
Meantime, Pfizer is still dealing with Lipitor getting into the grasp of the generics, but the stock has performed well in the past year, rising more than nearly 18%, helped by a hefty forward annual dividend of 88 cents, translating to a yield of more than 4%. Wall Street is expecting a profit of 47 cents a share from Pfizer on revenue of $16.6 billion in its fiscal fourth quarter. The vast majority of the buy side is bullish with 19 of 23 analysts at strong buy (8) or buy (11), and the median price target at $25 vs. Monday's close at $XX.XX.
UBS maintained a buy rating and a $25 price target on Pfizer on Monday after the company received regulatory approval for its Axitinib treatment for advanced kidney cancer, and gave a rundown on its investment thesis.
"The positive pipeline momentum provides additional confidence that Pfizer can return to top-line growth after Lipitor goes generic," the firm said. "We still like the PFE value story (share repo, dividend, strong cash flows) and look forward to the monetization of Animal Health and Nutrition and Tofa approval as the key catalysts for the stock this year."
The rest of the morning roster features
Illinois Tool Works
Kulicke & Soffa Industries
United Parcel Service
The late reporters include
Applied Micro Circuits
also reports after the bell, and the stock is usually a big mover in the after-market. The average estimate of analysts polled by
is for earnings of 65 cents a share on revenue of $1.8 billion in the fiscal fourth quarter.
The stock is down 25% in the past year, but Wall Street is bullish on Broadcom with 35 of the 41 analysts covering the stock at strong buy (14) or buy (21), and the median 12-month price target at $41 vs. Monday's close at $34.45. Benchmark, which has a buy rating on Broadcom, previewed the quarter last week, saying first-quarter guidance is the biggest issue for shareholders since the company preannounced in mid-December.
"Based on improving data points in the chip sector, we believe management's 1Q12 revenue guidance could
be approximately $1.80 billion vs. the current consensus of $1.74 billion," the firm said. "After adjusting for the Netlogic acquisition (~0.10 of accretion) and expiration of the Qualcomm royalties (~0.18), Broadcom shares are trading at 13.0X EPS, a four point discount to the broad chip sector."
Tuesday's economic data includes the employment cost index for the fourth quarter at 8:30 a.m. ET; the Case-Shiller 20-city home-price index for November at 9 a.m. ET; the Chicago purchasing managers index for January at 9:45 a.m. ET; and consumer confidence for January at 10 a.m. ET.
Ian Shepherdson, chief U.S. economist at
High Frequency Economics
, is expecting homes prices will show a decline again for November (the consensus is for a 3.2% decline, according to
) but that consumer confidence should keep improving.
"The Conference Board's measure of consumer confidence is driven largely by movements in stock and gasoline prices and the labor market, not home prices, so we expect a third straight increase in today's January report," he wrote. "Finally we think Chicago PMI will slip a point or two but will easily remain high enough to suggest the manufacturing sector continues to expand."
The consensus estimates are for consumer confidence to tick up to 67 from a prior reading of 64.5 in December, while Chicago PMI is seen coming in at 63. Shepherdson is looking for consumer confidence at 68 and Chicago PMI at 61.
Another factor in Tuesday's action could be the European Council's preliminary agreement late Monday on a new
for the region. The main provision is a balanced budget rule, which calls for a country's deficit to no exceed 0.5% of its nominal GDP.
"This balanced budget rule must be incorporated within one year into the member states' national legal systems, at constitutional level or equivalent," the press statement reads. "In the event of deviation from this rule, an automatic correction mechanism would be triggered."
The treaty, which was ratified by the majority of the countries of the European Union with the exception of the United Kingdom and the Czech Republic, is to finalized in March and will be enforced once it's ratified by 12 EU member countries.
after the consumer electronics retailer gave a below-consensus profit outlook for the fourth quarter, blaming much of its woes on the weakness of its business with
Written by Michael Baron in New York.
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