WASHINGTON, August 1, 2013 — This week’s market has been looking more than a bit tired, particularly when you compare it to July’s irrational exuberance. Earnings season competed yesterday with the Federal Reserve’s Hamlet-like indecisiveness on the future of its ongoing QE monetary stimulus, the effects of which seem to be maxing out.
Stocks have continued to levitate on low volume, continuing the strange summer melt-up, which, while fun, still seems suspicious beneath the surface. Bonds, on the other hand, are continuing to experience a selloff of the Chinese water torture variety, indicating that the bond vigilantes are continuing to drive yields up in defiance of the Fed’s determination to keep them down.
For its part, the Fed stopped short of signaling any timetable Wednesday for slowing its bond buying at all, likely hoping to put taper-talk to rest at least for now. Instead, it dropped hints that it might need to maintain its $85 billion a month in bond purchases, which have helped keep long-term borrowing rates ultra-low.
In a bit of unintended humor, the Fed’s statement yesterday noted for the first time that mortgage rates, which have fueled home sales, “have risen somewhat” from record lows. That observation wins an Oscar for the biggest understatement of 2013, as “risen somewhat” in this context describes the whopping one percent hike in mortgage interest rates just over the last month or so.
This ludicrous observation is the clearest indication yet that no one in Washington, including the barnstorming President, has any clue as to what middle-class families and middle-class finances are experiencing outside the concrete and asphalt moat known as the Capital Beltway.
Given continuing low volume, typical of summer trading, the ongoing summer earnings season (second quarter reporting) is frequently causing huge updrafts and downdrafts in stock prices as companies report. Companies like once-beleaguered Facebook (FB) are getting big boosts, while the report that JC Penney (JCP) was being cut off from credit by finance giant CIT—denied this morning by Penney—resulted in a severe smackdown of that stock.
Since the late spring pummeling of utility stocks seems to have paused at least for the moment, down days might be a good time to sneak back into some of the stronger names. Spokane-based hybrid utility Avista (AVA) has been doing well lately and boasts an approximately 4.25 percent dividend at its current price. South Dakota-based energy company and utility Black Hills Corp. (BKH) is also looking steady-to-good with a lower dividend of approximately 2.85 percent but, perhaps, a better growth outlook.
Telecommunications companies have been taking a hit lately, although earnings have remained, in our opinion, quite good for many of them and dividends remain high. Tiny Virginia regional telco NTELOS (NTLS) took a hit yesterday after reporting a slight revenue miss, but the pricing action was illogical as the company actually raised its earnings guidance for the balance of FY 2013. Add to that the stock’s nearly nine percent annual yield, and this might be a good buying opportunity and we may add to our small position depending on today’s market action, which is pointing up at this morning’s open as of 9 a.m.
–AP contributed to this report
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He currently owns small positions in AVA and NTLS, mentioned above.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
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