Signs of recession in the market
June 2, 2008
Stock trading ended with another week of mixed results, not moving much in either direction. This was a short week (4 trading days), which started with a somber mood on Memorial Day. Memorial Day is not just a vacation-planning and barbecue day, if one remembers that the US has lost more than 4,500 soldiers in Iraq and Afghanistan since the beginning of the Iraq War. It is possible that the fast rising gasoline prices will lead the US government to reduce its activities in this region in the future.
Meanwhile, US economy continues to grow at a relatively slow pace, mainly due to the biggest slump in housing starts in 26 years and the first decline in final domestic sales in 17 years, as reported by the Commerce Department. In light of this, it is not surprising to see retailers such as Sears (SHLD) reporting a first quarter loss, as it clears merchandise in order to face the increasing competition from other retailers and the slowing in economy. As is the case with other retailers, Sears is also not immune to the declining housing and credit markets and higher gasoline and food costs that have hurt consumer spending and made shoppers more budget-conscious. In addition, Sears has lost sales and customer volume to rivals such as Wal-Mart (WMT).
Dell (DELL), on the other hand, reported higher quarterly sales and earnings late Thursday, numbers that topped estimates. Dell’s positive report could be a sign of a recovery in the technology sector. Another corporation that beat analysts’ predictions is Marvell Technology (MRVL) that reported sales and earnings that overcame these forecasts and sent its shares up by 24%.
The airline industry continues to tumble as oil prices jumps. U.S. Airways (LCC) confirmed this week that they are suspending merger talks with United Airlines (UAUA) aimed at creating the world's largest carrier. Now the question for those and other U.S. airlines is how to get by and make money with oil prices near $130 a barrel. Despite the suspension of the talks, few analysts claim that this rough situation will eventually make the airline industry stronger as smaller companies merge to create larger and more stable companies. As a result, costs will decline and airlines tickets could possibly get cheaper.
Yalicoo’s highlights of last week
The May
monthly competition that just ended last week, taught us that choosing the right stocks is not everything; it is also important to know when you to buy them.
SC14 bought excellent stocks in great timing; they earned his portfolio 22.42% just after the first week of the competition. Thereafter, he chose to hold no stocks for the rest of the competition, betting that the market will plateau for the next two weeks. And, he was right; the market did stay more or less at the same position, and none of the other players succeed to pass his return. However, this was a risky bet since
yhjia got very close to SC14, reaching a return of 21.1%, taking the second place.
A new monthly competition is starting today. Remember the lesson we learned from the last competition, and do not wait too long to register. Also remember that encouraging your friends to register and join the competitions increases the amount of information about diverse stocks our competitors are exposed to, leading eventually to potential larger profits in the “real” portfolios.
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