|Dow||-200.19 to 17,776.12|
|S&P 500||-18.35 to 2,067.89|
|Nasdaq||-46.56 to 4,900.88|
|10-YR Yield||-0.03 to 1.93%|
|Gold||-$0.80 to $1,184|
|Crude Oil||-$1.12 to $47.56|
It’s official: The first quarter is in the record books! So who won? Who lost? And what’s next?
Well, let’s start with a breakdown of the Standard & Poor’s 500 Index groups. When I do that, I see that a lot of health-care and tech-related stocks performed very well. Managed health-care names surged around 22 percent, while health-care distributors and technology firms saw gains of around 14 percent.
Meanwhile, Internet retailers tacked on around 15 percent. Other companies in the entertainment software and electronics manufacturing services businesses also turned in double-digit gains.
|Managed health care names surged 22 percent this quarter.|
On the flip side, companies in the materials space performed terribly. Aluminum, diversified metals and mining, and coal stocks were down anywhere from 17 percent to almost 19 percent in the first quarter. Oil and gas drillers, consumer finance stocks, and makers of semiconductor equipment also fared poorly.
Mergers and acquisitions were a key factor driving the top individual names. Hospira (HSP, Weiss Ratings: B-) surged more than 43 percent in the quarter after pharmaceutical giant Pfizer (PFE, Weiss Ratings: B) agreed to buy it. And Kraft Foods Group (KRFT, Weiss Ratings: B-) soared 42 percent after Warren Buffett and 3G Capital Partners agreed to buy the company and fold it into their Heinz food empire.
Earnings disappointments and pressure on energy markets helped drag down the top laggards in the quarter. Flash memory maker Sandisk (SNDK, Weiss Ratings: B) plunged more than 34 percent after the firm slashed its first-quarter sales forecast. Energy services firm Ensco PLC (ESV, Weiss Ratings: D+) lost around 30 percent amid weak demand for offshore drilling work. It announced plans to shut down rigs, and cut its quarterly dividend 80 percent to preserve cash.
The strong dollar heavily influenced the commodities market this quarter. Crude oil futures lost around 9 percent, while gold went nowhere, in part because the euro currency tanked more than 11 percent against the buck. That was the euro’s worst quarter since it was rolled out on the world stage Jan. 1, 1999.
|“I believe oil is too cheap, many materials stocks are too cheap, and emerging markets names are too cheap.”|
So what comes next? Are materials stocks going to rack up more doggy quarters? Is the euro going to keep tanking? Are health-care and tech stocks going to keep dominating?
My take is that we could see some major, “Big Reversal” trades unfold in coming months. I believe oil is too cheap, many materials stocks are too cheap, and emerging markets names are too cheap. At the same time, the dollar is wildly overvalued and market positioning is incredibly extreme.
In fact, my research shows this is the single-biggest, fastest, most radical move higher in the dollar since 1984-85. That rally prompted so much pushback from U.S. monetary and fiscal authorities that it led to the Plaza Accord of September 1985. That multinational accord to weaken the dollar led to a whopping 48 percent depreciation over the next couple of years!
I’m not saying we’re on the cusp of a Plaza-style deal today. What I am saying is that there’s a lot of dry tinder out there. All we need is something to light a fire under some sectors and asset classes. That, in turn, would lead to radical shifts among the leaders and laggards in the rest of 2015.
But that’s just me. What do you think? Are the winners in the first quarter going to continue to win for the rest of the year? Or are the losers going to make up lost ground? Which horses are you hitching your portfolio to right now, and are you planning to change that in 2015? Here’s the link to the Money and Markets website. Share your opinions as soon as you can!
|Our Readers Speak|
In the wake of a massive public firestorm, Indiana lawmakers appear poised to amend the Religious Freedom Restoration Act. The move is designed to counter criticism that it could allow businesses or residents to discriminate against gay individuals.
Here on the website, you weighed in with comments on both sides of the issue. Reader Justin W. said:
“It was a great day in Indiana to see the government is interested in protecting the religious rights of its citizens. Our community debated a fairness ordinance several months ago. Supporters of the law couldn’t provide any example of rampant anti-gay discrimination where an actual business was named. Some Christians voiced their willingness to serve any customer regardless of sexual orientation.
“The RFRA laws protect the livelihood of those who hold beliefs at odds with the noisemakers of society. I suspect a year from now, people will have trouble finding anyone who has actually been harmed by this legislation.”
But Reader Joe countered by saying: “Why did Indiana need this bill? What event or problem caused someone to write and promote this bill? And every justification I have seen for this bill suggests that wedding photographers and cake makers were being forced to provide services to gay couples!
“Is this really a problem in Indiana? Can anyone give me one example with names? It appears as though stupid, homophobic politicians have made all Hoosiers look stupid and prejudiced. My friends and I are now assuming Governor Pence is NOT going to run for the presidency or any other office!”
Clearly, this is an issue that provokes strong emotions. What is noteworthy from an investment or markets perspective is that Corporate America rapidly and loudly stood up and spoke out against the legislation, rather than try to ignore it. That’s a key reason legislators are frantically trying to revise the law. It’s the power of the purse at work!
Meanwhile, Reader Jim W. said the U.S. should take a harder line than it is with Iran over its nuclear ambitions. His view: “If the U.S. makes a deal with Iran that allows them to produce nuclear weapons, future generations of Americans will be dealing with the very great possibility of nuclear war.
“Iran signed the nuclear nonproliferation treaty, which does not allow them to have a nuclear weapon. They have never kept any treaty that they signed. Once they obtain nuclear weapons, there will be no alternative to avoid a nuclear war. Iran has no desire to avoid it.”
Finally, Reader Chuck B. shared his not-so-high opinion of the New York AG’s investigation into supplement makers. His take: “I understand that he chose a company to do testing which used a testing method that completely destroys herbal ingredients. Naturally, they said there were no herbal ingredients in the products they tested. So much for that.”
Investors seem to agree that the whole thing was a tempest in a teapot Chuck, judging from trading action yesterday in GNC Holdings (GNC, Weiss Ratings: B+) shares.
Any other thoughts on these issues? Then don’t forget to use the Money and Markets website as your outlet. Here’s the link!
|Other Developments of the Day|
So much for all that “progress” being made in Switzerland. After several days of marathon talks, and lots of happy talk about potential results, Iran and the U.S.-led coalition failed to come up with an agreement today.
The U.S. said talks will continue for another day as a last resort. But even if we do get an interim announcement, it will likely punt on major issues related to sanctions and storage of nuclear fuel abroad until June. That means nobody will be happy — not Congress, not Israel, not Saudi Arabia, and not the Iranian hard-liners back in Tehran who ultimately have to sign off on any agreement.
Media reports out of Europe continue to paint Germanwings Flight 9525 co-pilot Andreas Lubitz as a potentially troubled, mentally unstable individual. He had reportedly demonstrated suicidal tendencies in the past, and was deemed unfit to fly by doctors … yet managed to hide that from airline officials and board the doomed flight anyway.
The fight in Yemen is getting uglier, with fresh airstrikes killing dozens of people — including some at a refugee camp in the country’s north. And despite the Saudi-led strikes, Houthi rebels are reportedly continuing to advance on the southern city of Aden. If they overrun the city, it would eliminate the last base of power for ousted Yemeni President Abed Rabbo Mansour Hadi.
Another day, another multi-billion-dollar merger, this time in the cable industry. Charter Communications (CHTR, Weiss Ratings: C) will buy Bright House Networks for around $10.4 billion to expand its presence in key markets like Orlando and Tampa.
The deal is only the latest in an industry that’s been consolidating for years. Comcast Corp. (CMCSA, Weiss Ratings: A-) is in the process of trying to buy Time Warner Cable (TWC, Weiss Ratings: B+), but is still awaiting government approval for the $45 billion transaction.
Here’s the link to the website where you can comment on these news stories or others you’ve seen.
Until next time,