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My Gut Feeling for Today, Feb 1, 2012

February is set to kick off on a strong foot. I would attribute this to two major news items. First is better than expected manufacturing and economic data emanating from China. These Chinese data points are relieving fears of a “hard landing” in China. Then in the US last evening Mitt Romney delivered a decisive victory in the Florida Republican primary over Newt Gingrich. Gingrich won a stunning victory in South Carolina the week before. Political pundits see Gingrich losing any momentum he may have garnered the week before. His campaign is also running short on much needed funds which is forcing Gingrich to cede several future primaries to Romney. The market likes the greater certainty of a Romney ticket for the election against the incumbent Barak Obama. Beside those two news items the typical first day of the month mutual fund inflows will help with the early market bid.

The ADP (ADP) employment report is set to be released today. This was once a market moving announcement but the markets have gotten smart to the report and prefer to waituntil the Bureau of Labor Statistics publishes its formal report on Friday. Car sales for the month of January are expected to be released today. This could move some stocks such as Ford (F), General Motors (GM) and Toyota (TM).

I am beginning to ask myself if performance anxiety has already taken hold after one month has elapsed so far in 2012. Too many people have been using the market volatility playbook rather than a traditional fundamental playbook in assessing their tactical and strategic trading and investment capital allocation. As I have written before in “My Gut Feeling,” I strongly believe the markets are returning to a state of more traditional investment behavior.

Last evening’s earnings results are going to be felt in stock prices today. Amazon.com (AMZN) is sliding close to 10% as the company is not able to monetize the money losing Kindle Fire and shipping costs are cutting into margins. On the other hand, Seagate Technology (STX) is set to move up close to 10% on strong results and guidance. Kudos to Robert Marcin for alerting all of us to this stock right here on Wall Street All-Stars.

There are some earnings for everyone day. Northrop Grumman (NOC) will tell us about the state of defense spending in the morning while Hershey (HSY) might confirm that lower cocoa prices are helping margins. In the afternoon Chipotle Mexican Grill (CMG) is certain to put up some big numbers. I will be keenly focused on guidance and new store count expectations, with an eye toward international expansion. In techland JDS Uniphase (JDSU) and Qualcomm (QCOM) will also report after hours.

Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long CMG and STX stock and F warrants  — although positions can change at any time.                                                                                                                     


Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com 

Chat with Scott all day in “The Finance Professor’s Classroom” with your Platinum subscription to Wall Street All-Stars.

You can email Scott at scottallstars@gmail.com



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