After Friday’s strong advance, topping off a bullish week, the markets had a chance to catch their breath and rest a bit as the kick-off holiday weekend sales and analysis were absorbed. An early sell-off was bought and the markets ended mixed – larger cap indexes were lower while the tech and smaller cap index rose.
Apple (AAPL) was the big story. Sales of iPads were very strong. Inventories of the iPad Mini were slim or non-existent. This forced many purchasers to order directly through the Apple website. My observations are that the Mini was being bought by newcomers to Apple rather than exiting Apple customers. Furthermore, these were being bought not as an alternative to the iPad Maxi (the full sized Apple version of its tablet) but rather as alternatives to laptops produced by the likes of Hewlett Packard (HPQ) and Dell (DELL). People are also trading up from the original iPad Maxi or version 2 to the newest version. The market caught on to these phenomena as well and rallied Apple by 18 points, just over 3%. The stock has now rallied over 16% in the last week since bottoming intra-day at $505.75.
Other developments are also materializing which continue to whittle away at the market’s “wall of worry.” First is the beginning of Republican law makers parting from the no tax pledge which was spurred by the un-elected but powerful Grover Nordquist. This is a key ingredient to getting a compromise fiscal cliff solution agreed upon. Do I want to see taxes rise? No. However, I would rather see taxes nudged up a bit, even as a symbolic measure for the highest of income earners rather than being increased across the board. Entitlements are likely to also feel some of the pinch. Without a compromise we will have a big financial mess on our hands. I believe an agreement will be reached by Christmas. Another major development is the Greek Aid deal which was reached late yesterday by the European Union.
Las Vegas Sands (LVS) announced a special $2.75 dividend payable before the end of the year. Expect more cash rich companies to issue special one-time dividends like LVS in an effort to avoid potential dividend tax increases should the legislators in Washington not come to a budget compromise.
Another day of sideways action would certainly be welcome. However, recall that I called for a 100 point S&P 500 (SPX) rally. We are about 60 points into that rally, which equates to about 4.5%. I expect another 40 points of upward movement. Taking out the year’s high of 1,474.50 (we now stand at 1,406.29) would not be impossible, but I would be just as happy if we got to 1,450 by New Year’s Eve.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL stock and calls and LVS stock — 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
The above in whole or part was republished from The Finance Professor’s Blog
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