Updated from 7:57 p.m. ET to include commentary on Tuesday's economic data
NEW YORK (
) -- The
Dow Jones Industrial Average
and its frustrating quest for 13,000 is getting more digital ink, but the bulls are likely paying more attention to the
and its inexorable march higher.
So far in 2012, the S&P 500 has finished up nearly 70% of the time on a daily basis, rising in 26 of 38 trading sessions. The index closed at a multi-year high of 1367.59 on Monday, staying at pre-financial crisis levels, and the intraday peak of 1371.94 was a new high for the past year, eclipsing a level last seen in early May 2011.
The big question now is when will investors who have ridden this market up more than 20% since the October lows take some profits? What will the S&P 500 do now that it's coming up against some
? Things are just a bit too quiet for comfort at the moment.
Both volume and volatility are low, and the violent swings that dominated market action from August through October are off the menu. Everyone's bullish from
to the Oracle of Omaha, who might do with a reminder from one of his old shareholder letters.
"Investors should remember that excitement and expenses are their enemies," Buffett told
faithful back in
. "And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful."
The market sentiment right now is up, up and away for equities, i.e. greedy, and that would seem to indicate it might be smart to be at least a little afraid. Sam Stovall, chief equity strategist at
S&P Capital IQ
, had this take on the market's mood on Monday.
"How can a more-than 4% month-to-date (through February 24) advance in the S&P 500, on top of a 4.4% gain in January, cause investors to feel a bit unnerved?" he asked. "Answer: When it comes during a more than a 24% surge off of the October low, with the last 2%+ single-day decline occurring on December 8 and the results for the second-worst month for the market have been anything but."
That about it sums it up. Stovall notes that this February has been the best one for the S&P 500 since 1998, and that overall, the index is off to its strongest beginning since 1991, the year grunge broke. What's more, history seems to indicate more good times ahead in the next few months now that the S&P 500 has wiped out last year's correction.
"Following the conclusion of all corrections since World War II, the S&P 500 advanced an average of 9.8% over the coming 121 days (four months) before experiencing another decline of 5% or more," Stovall wrote, adding later: "So if history should repeat itself, and there's noguarantee it will, even though a minor digestion of recent gains may occur at any time, the S&P 500 could climb to just above 1400 or as high as 1500 in the coming one-to-three plus months before enduring another decline of 5% or more."
It seems like stocks are overdue for at least a blip though as some of the folks who suddenly find themselves whole again after just six months are likely to take some money off the table.
As for Tuesday's scheduled news, Jamie Dimon and
will be making headlines as the bank holds its investor day. JPMorgan, generally considered the best of the big banks (although
is starting to push it these days), has enjoyed a solid 15% year-to-date gain, closing Monday at $39.06.
The performance is not as gaudy as
Bank of America
, up 42%; or
, rising 22%; but the shares also haven't been as volatile (or damaged) as those names in the recent past either. Expect the atmosphere to be a bit more hostile than usual as JPMorgan is coming off a disappointing earnings report (in-line profit, an $800 million revenue shortfall), so it doesn't exactly have a whole lot of goodwill built up with the buy side right now.
In fact, Credit Agricole's Mike Mayo went so far as to suggest the bank needs to be broken up to get the valuation it deserves.
At what point does the conglomerate discount become so great that it encourages the company to take action?," Mayo wrote in a preview on Monday. "The pieces of JPMorgan are worth 1/3 more than the current market value (est) based on a sum-of-the-parts analysis. As a result, should JPMorgan sell higher-valued asset management and processing and redeploy the proceeds to share buybacks?"
Mayo doesn't deny JPMorgan is the best of the money-center names but he argues that this isn't a justification for it to continue as presently constituted in and of itself.
"On Tuesday, we expect the company to make the case that these and other businesses provide firm-wide synergies, though the ultimate proof is not whether JPM is best in breed vs its global peers (which it is), but whether it is best in class vs non-conglomerates (not the case). The stock seems undervalued, but the question is how and when this value gets realized?," he said.
Mayo uses peer comparisons for JPMorgan's manifold businesses to make his case for a break-up, and notes that Jamie Dimon is a reason to buy the stock only so long as he remains at the helm.
"Since 2004, JPMorgan has well outperformed other global banks (Citigroup, Bank America, Deutsche Bank, Credit Suisse, UBS, Barclays, HSBC) but its flat stock price and performance does not compare as well to best-in-class players in asset management (T Rowe Price and Blackrock up 2-3x), cards (American Express up 20%), Goldman Sachs (up 20% - better Asia/non-US), retail (Wells Fargo up modestly), or a proxy of players such as these (underperformed by 20% since 2004, though flat since 2007)," he said. "In addition, key-man risk with the CEO needs to be monitored."
Check out TheStreet's quote page for JPMorgan Chase for year-to-date share performance, analyst ratings, earnings estimates and much more.
is reporting its fiscal fourth-quarter results before the opening bell, and the average estimate of analysts polled by
is for breakeven results on revenue of $2.99 billion.
With more debt ($683 million) than cash ($453 million) as of the end of September quarter, shares of the office products retailer have struggled over the past year, falling more than 40%. Like many of 2011's biggest losers, the stock has been on a run since the calendar turned though, rising 36% as of Monday's close at $3.02. Since hitting a 52-week low of $1.75 in early October, the shares are up 72.6%.
Wall Street is on the sidelines with 16 of the 19 analysts covering Office Depot at either hold (14), underperform (1) or sell (1), and the 12-month median price target at $3.05.
The Boca Raton, Fla.-based company is in the midst of a long-term restructuring plan as it works to streamline operations and return to sales growth in North America. If it can meet or beat the consensus revenue view for this quarter, that would be a slight improvement from sales of $2.96 billion in the same period a year earlier, providing some evidence that it's on the right track.
The stock currently trades at a forward price-to-earnings multiple of 43X vs. 10.3X for
, which reports on Wednesday and is consistently profitable. At these elevated levels, Office Depot shares look stretched, given how much work the company still has to do on its balance sheet. This is also not a trade for the faint of heart because of the volatility the stock has displayed, ranging from that low of $1.75 to a high of $5.54 last March.
Check out TheStreet's quote page for Office Depot for year-to-date share performance, analyst ratings, earnings estimates and much more.
The other early reporters Tuesday include
Fortress Investment Group
Fresh Del Monte Produce
Heidrick & Struggles
Magal Security Systems
The late roster features
Big Five Sporting Goods
Tuesday's economic calendar features durable goods orders for January at 8:30 a.m. ET, the Case-Shiller 20-city home price index for December at 9 a.m. ET, and the Conference Board's read on consumer confidence in February at 10 a.m ET.
After very strong numbers the past two months as year-end demand arrived, the consensus is for 1.4% decrease in durable goods orders in January and a 0.2% uptick excluding transportation. Those figures would follow year-over-year increases of 3% and 2.2% respectively in December.
Ian Shepherdson, chief U.S. economist at
High Frequency Economics
, sees the durable goods orders report as a "key test" of whether businesses remain confident to keep up capital spending on equipment following the expiration of the 100% tax deduction for such purchases on Dec. 31.
He sees a 1% decrease in total durable goods orders, but anticipates the ex-transportation number will show some resilience.
"Guided by the strength in the ISM manufacturing survey, however, we expect a 1% rise ex-transportation," he wrote in commentary late Monday. "The consensus forecast for this core number is no change, so the net effect of the reports should be to reinforce the idea that the industrial recovery is continuing at a decent clip."
Meantime, the Case-Shiller index is expected to show a 3.6% decrease. As evidenced by Monday's better than expected pending home sales number, the housing market is showing some signs of life but this data goes back two months so it's less likely to reflect the improved conditions of late.
The consensus is calling for the consumer confidence index to rise to 62.5 after a surprise drop in January to 61.1. Economists were looking for an increase to 67 in January after two months of nearly double-digit gains, so the decline was a surprise that was mildly disconcerting amid the positive economic data that's been piling up over the past few months.
Shepherdson is at 65, arguing that the strong stock market should be good for a larger than expected boost.
"The latest spike in gas prices could cap the index over the next couple of months, but we expect nothing like a repeat of spring of last year, when the index dropped sharply, heralding a temporary stalling in consumers' spending," he said.
was a big gainer in Monday's
after the online travel booking services company destroyed Wall Street's profit expectations in its latest quarter, validating the 25%-plus appreciation it's seen since the start of the year.
Priceline.com said its retail hotel reservation business saw strong growth in the December-ended quarter, and it gave an above-consensus outlook for the current period, forecasting non-GAAP earnings of $3.80 to $3.90 vs. the average analysts' view of $3.72. The stock leapt nearly 7% to $630.60 in late trades.
Check out TheStreet's quote page for Priceline.com for year-to-date share performance, analyst ratings, earnings estimates and much more.
Written by Michael Baron in New York.
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