Mobile Usage Hurts Google
The easiest way for investors to become more decisive in the financial markets
is for earnings to justify higher stock prices. While after-hours quotes should
always be taken with a grain of salt, Google was down 2.48% after releasing
some disappointing figures late Wednesday. From Bloomberg:
Google Inc.'s costs are rising as the search provider finds it harder
to keep up with a broad shift to advertising on mobile phones, with sales
falling short of estimates. Google's audience is steadily migrating to
smartphones, where the company gets less money for marketing spots than
on desktops and tablets.
Dow Making 3rd Attempt At 16,580
After pointing out a Dow Theory non-confirmation that was in place on April
4, the S&P 500 dropped over 50 points. Has the Dow posted a new closing
high during this week's rally? Not yet. The inability to print a new high
is indicative of investor doubt about earnings, the economy, and central
bank policy. Janet Yellen's remarks helped boost stocks Wednesday, but those
moves can be "one day wonders". We will see if the gains can continue on
Thursday.
IBM Not Helping The New High Cause
IBM carries the third highest weight (7.7%) of any stock in the Dow Jones
Industrial Average. Therefore, the reaction to Wednesday's earnings will impact
the Dow Thursday. The early reaction was not favorable for Big Blue. IBM was
down over 4% in the after-hours session on revenue concerns. From MarketWatch:
Revenue slipped to $22.48 billion, below the $22.91 billion projected
by analysts polled by Thomson Reuters. It was the eighth straight quarter
IBM has reported weaker revenue from year-earlier levels. Though the computing
and tech giant remains a key provider of computer hardware, software and
services to big corporations and governments around the world, IBM is struggling
to respond to technological advances such as cloud computing, which allows
customers to rent computing power and software over the Internet. Slowing
demand in emerging markets, especially China, is also posing a challenge
for Big Blue.
Investment Implications
Janet Yellen's stock-friendly comments helped spark a strong day in stocks
Wednesday. Given the schizophrenic nature of the shifts between risk-on and
risk-off in recent weeks, we prefer to see if stock gains can hold into the
holiday weekend before considering any adjustments. You would think with stocks
gaining ground Monday, Tuesday, and Wednesday, bonds would be getting killed.
The long-term Treasury ETF (TLT) is up 0.49% this week, which indicates some
ongoing economic skepticism. Both our stock (SPY) and bond positions are in
the black for the week. We will see how the stock market handles the disappointing
reports from Google and IBM.
