Daily Market Update – July 29, 2014 (Close)

While today will be another busy earnings day, having already gotten underway with Pfizer and others, it’s likely to be relatively quiet as it usually is once the FOMC meeting gets underway.

While some additional sanctions on Russia did have some mildly negative impact on the market, ringing it down from an equally mild gain, it was really a quiet day and no surprises were in store, other than from a possible gift from the IRS to companies with significant land holdings used to bury cables, such as for land telephone lines and cable television.

However, the real surprise would be if at 2 PM tomorrow there is some surprise coming from the statement released after the two day meeting. However, increasingly the words are being parsed for the slightest hint of nuance or the appearance of a new word or deletion of an old one, in order to ascertain what is really going on in the minds of those in control of the economy. That could mean some reaction beyond the usual knee-jerk response, which itself was actually missing at least month’s release.

Following a nice recovery from yesterday’s early sell-off there’s reason to believe that records could easily be assaulted again, especially if some of the bigger names come out with earnings. It doesn’t take too much to move the DJIA and this morning both Merck and Pfizer seem to be contributing to the pre-open advance, as they have released their earnings. Verizon and AT&T are also both up strongly, helping to give the DJIA an early lead over the broader S&P 500.

Pfizer, itself, later gave up a nice gain, not because of earnings, but almost the instant it mentioned that it wasn’t giving up on the idea of a blockbuster kind of acquisition, perhaps even another run at Astra Zeneca. Apparently the market didn’t like that kind of aggressiveness particularly with the flurry of concern around so called “inversions” which could include being ineligible for any kind of federal contracting, which could be a huge blow to a company like Pfizer. 

Otherwise, with the early assignment of Texas Instruments in order to capture the dividend that pesky problem of having cash is even greater now. I would still have liked the opportunity to spend some down and would have liked to have to seen another day of some downward moves or at least some flatness while awaiting something that looks appealing.

That downward move didn’t come until the end of the day, but hopefully the day’s earlier purchases in International Paper and Blackstone will still turn out to have been a relative bargain prices.

As with other times that problem of having cash has been the case, I’m not too likely to want to compound that problem by spending it down
just for the sake of spending it down. Last Friday seemed to bring some relative bargains, but the key word is “relative.” Many stocks still look and feel expensive so there has to be a nagging voice somewhere questioning every potential new purchase as being without value.

By the same token everything that looks like a bargain may get the same scrutiny as a 45 year old bachelor. People want validation for their biases. Why in the world hasn’t he never been married? Why would it be so “cheap” when everything else is going higher?

While one may certainly be a lifestyle choice, it would be hard to find anyone other than a short seller who wouldn’t want to see shares higher, so wondering why something hasn’t been participating may be a justified question.

Whereas yesterday I felt willing to jump in without waiting for much validation, in the hopes of picking up some of those seeming bargains, I don’t have that same confidence this morning. With the very strong early moves in some of the DJIA components there may be some early skew to the perception of how the market will actually trade. Those gains just seem to be illusory, very much based on some financial engineering ideas put forth by a tiny player in the communications sector that may have big implications for the likes of the behemoths, Verizon and AT&T.

So while I thought I would revert back to recent style and watch and see how the market’s trend, if any, would develop this morning, sometimes those plans gets scuttled as the opportunities seem to appear.

Sit would turn out, whether due to the new sanctions or not, much of the early rise fueled by the IRS decision died down as investors may have come to the realization that what matters for Verizon and others may have little to no relevance for anyone else and still may have some regulatory and even some further IRS hurdles ahead.