Worst Performing Industries For July 30, 2014

Related NTRI Morning Market Losers UPDATE: Barrington Initiates Coverage On NutriSystem Related QIHU Citigroup Sees Qihoo 360 Tripling Mobile Revenue In 2014 Citigroup Initiates Coverage On A Number Of Chinese Internet Stocks

The Dow dropped 0.37% to 16,849.10, while the NASDAQ composite index rose 0.30% to 4,455.97. The broader Standard & Poor's 500 index declined 0.11% to 1,967.72.

The worst performing industries in the market today are:

Consumer Services:

This industry tumbled 3.23% by 11:30 am. The worst stock within the industry was Nutrisystem (NASDAQ: NTRI), which fell 10.4%. Nutrisystem reported Q2 earnings of $0.30 per share on revenue of $111.10 million. The company also issued a weak Q3 revenue forecast.

Internet Service Providers:

This industry fell 2.02% by 11:30 am ET. Qihoo 360 Technology Co (NYSE: QIHU) shares dropped 2.9% in today's trading. Qihoo 360 shares have jumped 53.80% over the past 52 weeks, while the S&P 500 index has gained 16.86% in the same period.

Movie Production, Theaters:

The industry dropped 1.85% by 11:30 am. The worst performer in this industry was DreamWorks Animation SKG (NASDAQ: DWA), which declined 14.5%. DreamWorks posted a wider-than-expected loss on revenue below analysts' consensus.

Industrial Electrical Equipment:

This industry moved down 1.34% by 11:30 am, with Regal Beloit (NYSE: RBC) moving down 9.1%. Regal Beloit reported Q2 earnings of $1.27 per share on revenue of $850.40 million.

Posted-In: Worst Performing IndustriesNews Movers & Shakers Intraday Update Markets

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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U.S. economy bounces back sharply

NEW YORK (CNNMoney) What a relief. The deep economic contraction earlier this year was temporary after all.

New data released Wednesday show the U.S. economy bounced back in the spring, growing at a 4% annual pace in the second quarter. That was even better than the forecast of 3% growth, according to a consensus of economists surveyed by CNNMoney.

Consumer spending, which alone accounts for about two thirds of U.S. economic activity, strengthened, as did exports to foreign countries and business investments.

American consumers spent more money on long-lasting goods like autos, appliances and furniture, while businesses invested more in technology and industrial equipment. Both can be seen as good signs that households and companies are more optimistic and investing in the future.

The Bureau of Economic Analysis also revised historical data, and the new numbers show the bad winter wasn't quite as bleak as last reported. The economy contracted at a 2.1% rate in the first three months of the year, as opposed to the decline of 2.9% reported last month. Meanwhile, the second half of 2013 was also stronger than originally reported.

The beginning of the year was marked by a disconnect in the economic data. Employers were hiring at their strongest pace in years despite the drop in GDP.

Now, economists are hoping the overall economy is back on track. A separate report released by payroll processing firm ADP (ADP) earlier Wednesday shows the private sector added 218,000 jobs in July.

"Businesses are not just spending on new equipment and structures, but manpower, too," said Sal Guatieri, senior economist at BMO Capital Markets.

On Friday, the Department of Labor will release its latest jobs report. Economists surveyed by CNNMoney predict that 230,000 jobs were added in July. If they're right, that will mark the sixth month in a row where the economy added more than 200,000 jobs.

The Federal Reserve is closely watching the data too. The central bank is in the process of winding down its stimulative policies and is expected to consider its first interest rate hike since 2006 sometime soon.

  Yellen on human toll of unemployment

"The second half of the year will determine which is the 'real economy,'" said Lynn Reaser, chief economist at Point Loma Nazarene University. "The Fed is betting on strength but needs to see more evidence, as do we all."

The task before the Fed is a delicate one. If the Fed hikes rates too soon, it could hinder economic growth. If it waits too long, inflation may rise too quickly. Most economists expect the first rate increase to occur in the spring or summer of 2015.

The Fed's top officials will issue their latest policy statement later Wednesday. Fed watchers expect little news, aside from another $10 billion cut in bond purchases. The central bank has been gradually reducing, or tapering, its monthly bond purchases since January.

Can Boeing’s Dreamliner Fetch Profits For Its Investors?

The lead aero major Boeing has witnessed huge difficulties with its revolutionary aircraft, the 787 Dreamliner which is the first aircraft to be madeof composite material. Losses and costs have been piling up year after year. The company expects that the deffered cost with respect to the jet to increase to $25 billion by the end of next year. However, the plane manufacturer is working to stabalize the production rate of the 787. The deliveries of the initial lot of planes would comes at a loss. But if Boeing manages to maintain the jet's production level to 10 a month, break even wouldn't be a farfetched target.

However, the jetliner's technical snag seems endless. This means more investigation and additional cash drain. Under such scenario, how attainable would breaking even be, and when can the program turn profitable?

The Recent Woe The Dreamliner was caught in a technical glitch for the second time in a week when Air India witnessed some issues that could not be resolved by a group of engineers even after devoting hours. In the earlier case when the 787 was grounded in the same week, the cabin crew of the jet realized that the flight deck door did not shut fully because of which the sound of the air was audible. This aircraft too was taken to the engineers to see if the slip could be fixed, but its didn't work out.

The first plane was suppose to fly 126 passengers to Birmingham, while the second plane was to fly 246 passengers from Delhi to Australia. Both these planes were grounded and replacements where found to carry the passengers to their respective destinations. Early July too, a couple of Dreamliners were reported to have suffered slips in their systems.

While on one hand headlines regarding the technical faults with the Dreamliner come out every now and then, Boeing's working hard to head towards profitability of this program. If we factor in such recurring problems with the Dreamliner, will the company be able to creep in the black?

When to Expect the Dreamliner to Move in the Black Knowing the massive cost of developing the Dreamliner, Boeing's working to streamline the production process from quite some time. The efforts have eventually started paying off. Improvement in the supply chain process and incentive programs have done good to take the Dreamliner closer to profitability and turn the project into a feasible one.

The American manufacturer is gaining efficiency and is getting better at making the aircraft. This is visible from the 30 Dreamliner deliveries that the company made in the second quarter. This is the highest ever Dreamliner deliveries volume from the time it entered service. Company CFO Greg Smith gladly said at the second quarter conference call that the unit cost of the 787 has fallen by a good 13% over the past one year. He also said that "The cash flow position of the 787 continues to improve, as we drive productivity throughout the system."

Departing Thoughts This is positive news for its investors. Boeing's making good progress in the Dreamliner project and is finally converting the huge amount invested into cash. The program was delayed by three years when the company kept bleeding money on the aircraft. Technical issues keep popping up which could push back its profitability. Some industry experts believe that Boeing would have to produce and deliver more than 1,000 units of the aircraft to cover its costs and break even. Every improvement in the process would add towards lessening the piled up cost and headind towards profitability.

The company proposes to deliver 110 Dreamliners in the current fiscal year. And if Boeing is able to meet its target this year, it could mean that the company's on the right track to make up for the cost and losses of the project. However, it should be noted that factors such as technical difficulties could weigh on the results.

About the author:Quick PenA seasonal writer with a Management Degree in Finance and interests in automotive, technology, telecommunication and aerospace sectors.

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BA STOCK PRICE CHART 123.2 (1y: +18%) $(function(){var seriesOptions=[],yAxisOptions=[],name='BA',display='';Highcharts.setOptions({glo

Mortgage Rates Steady, Little Changed in Latest Survey

Ben Margot/AP WASHINGTON -- Average U.S. long-term mortgage rates were stable to slightly higher this week, remaining near their lows for the year. Mortgage company Freddie Mac said Thursday that the nationwide average for a 30-year loan was 4.13 percent, unchanged from last week. The average for the 15-year mortgage, a popular choice for people who are refinancing, edged up to 3.26 percent from 3.23 percent last week. Mortgage rates are below the levels of a year ago, having fallen in recent weeks after climbing last summer when the Federal Reserve began talking about reducing the monthly bond purchases it was making to keep long-term rates low. The government reported Thursday that sales of new homes in the U.S. plunged by 8.1 percent in June, a sign that real estate continues to be a weak spot in the economy. Home sales had been improving through mid-2013, only to stumble over the past 12 months due to a mix of rising prices, higher mortgage rates and meager wage growth. At 4.13 percent, the rate on a 30-year mortgage is down from 4.53 percent at the start of the year. Rates have fallen even though the Fed has been trimming its monthly bond purchases. Fed Chair Janet Yellen told Congress last week that the purchases likely will end completely at the end of October. But at the same time, Yellen said during congressional testimony that the Fed still sees the need to keep its benchmark short-term rate at a record low near zero to give the economy support.

Facebook rallies in after hours as results top outlook

Getty Images/file 2013 Enlarge Image Facebook Inc. posts adjusted second-quarter earnings of 42 cents a share.

SAN FRANCISCO (MarketWatch)—Shares of Facebook Inc. rallied in Wednesday's after-hours trading as the social media company reported better-than-expected quarterly earnings.

Facebook (FB) said its second-quarter earnings rose to $791 million, or 30 cents a share, from $333 million, or 13 cents a share, a year earlier. On an adjusted basis, the company earned 42 cents a share versus consensus estimate of 32 cents a share. Revenue jumped 61% to $2.91 billion. Shares rallied 4% in after hours.

Gilead Sciences Inc. (GILD) reported blockbuster second-quarter results and posted strong sales numbers for its new hepatitis C drug Sovaldi. Gilead shares gained more than 1% in extended trading.

E-Trade Financial Corp. (ETFC) said it swung to a second-quarter profit with results coming in slightly ahead of analysts' estimates. E-Trade shares slid in after hours.

TripAdvisor Inc. (TRIP) said its second-quarter profit edged up to $68 million, or 47 cents a share, from $67 million, or 46 cents a share, a year ago. Excluding one-time items, the online travel website would have earned 55 cents a share. Analysts surveyed by FactSet had forecast TripAdvisor to earn 61 cents. Revenue totaled $323 million, up from $247 million. Shares slumped 5% in after hours.

Qualcomm Inc. (QCOM) reported its third-quarter profit rose 42% on broad-based demand and raised its full-year adjusted earnings outlook to a range of $5.21 to $5.36. However, it expressed some concerns about China and said it believes certain licensees in the country are not fully complying with their obligations. Qualcomm shares fell 3.7% in after-hours trading.

Merrill’s New Training Could Put Advisors in ‘Sticky’ Situation

Starting in August, Bank of America-Merrill Lynch (BAC) says its advisor trainees will have the option of joining a team as a specialist and finishing the training program in about two and a half years, versus the traditional three and a half years.

The aim is to support advisors with succession planning and build “the bridges necessary for the next generation of advisors to continue to deliver the experience our clients expect and deserve,” according to a memo shared with advisors on Monday.

The trainees could chose to focus on business development, financial planning, investments and financing, relationship management or business management.

But how would affect the Thundering Herd of 13,845 reps?

“It looks a like a move to facilitate the growth of teams, which many firms feel enables advisors to provide a better client experience and makes advisors less likely to move,” said Mark Elzweig, an executive search consultant, in an interview. “The downside for advisors is that whenever multiple in-house specialists regularly touch client accounts, clients can be harder to move.”

In other words, Merrill’s new push to have trainees join teams as specialists adds to the “stickiness” of the both clients and advisors, who may be exposed to a growing array of Bank of America products and services, but will have a harder time jumping ship.

Of course, Mother Merrill doesn’t see it that way.

“Developing the next generation of advisors and supporting the growth of teams are critical factors in our ability to deliver on our goals-based wealth management strategy today and in the future,” the firm said in a statement.

Each year, Merrill brings in 1,500 to 1,700 advisor trainees for its Practice Management Development program, which was launched in 1946.

It currently has about 3,100 at various stages of the program. Going forward, those who have been in the program for up to nine months are eligible to apply to join the new Team Financial Advisor specialty training.

Some industry experts suggest that Merrill is looking out for its interests, as well as those of its parent company.

It started the rollout of its Merrill Lynch One platform, which unifies several account platforms, about a year ago, they point out. And the new trainee option, like Merrill One, provides more links between wirehouse clients and Bank of America.

While these steps may not be locking assets, clients and advisors down forever, of course, the new advisor technology and training programs seem to be making a “sticky” situation even stickier.   

Succession Challenge

Merrill Lynch is not the only firm working to help advisors with succession plainning while beefing up the flow of younger advisors.

In April, Raymond James' (RJF) independent broker-dealer said it signed a deal to give its advisors more resources for succession planning. Its new partners are Live Oak Bank and Key Management Group.

These groups will share preferred financing and valuation services with the independent-advisor practices and with prospective advisors.

“One of the most important issues facing our industry is the lack of documented succession plans for experienced, successful advisors,” said Scott Curtis, president of Raymond James Financial Services, in a statement.

“Not just catastrophic, business continuity plans, but well-developed and thoughtfully executed business succession and retirement plans,” Curtis explained. “They're an essential element of a business continuity plan for advisors and their clients.”

The financing and valuation services provided by Live Oak Bank and Key Management Group will be available to RJFS advisors May 1.

“Live Oak Bank is the only bank that is addressing the need for financing of advisory practices in the wealth management industry,” said Chip Mahan, CEO of Live Oak Bank, in a statement.

“We did a lot of due diligence, we really understand this sector and its particular needs relative to cash flows," he added. "We have customized our process for Raymond James and its affiliated advisory firms, and we have unlimited capital to fund these acquisitions.”

This program came on the heels of a push Rayond James made in Feburary to train a number client associates each year to become advisors. It is modeled on a pilot program for associates, which it started last year, to boost both the number of female advisors and to groom more successors for retiring advisors.

---

Related on ThinkAdvisor:

 

U.S. Production Continues Flatlining

U.S. markets finished the week up as some significant indicators of the U.S. economy's gross domestic product were released. Retail sales and industrial production showed some increases in June while housing starts were lackluster.

Retail Sales released by the Commerce Department increased 0.2% in June to $439.9 billion. This total was 4.3% higher than one-year ago. While higher for the month of June the report missed economists' estimates which were for 0.5% to 1.3%.

Industrial Production released by the Federal Reserve showed an increase of 0.2% in June. This brought the seasonally adjusted annual rate to 5.5% for the second quarter. For the one-year period industrial production was up 4.3%. The June report fell on the lower side of economists' estimates which were for an increase of 0.1% to 0.7%.

The positive reports for retail sales and industrial production in June further confirm that winter weather was most likely to blame for the first quarter's GDP growth. Despite the signs of strengthening in retail sales and industrial production in June however, data from the construction industry showed housing starts slightly down.

Housing Starts also released by the Commerce Department were 9.3% lower in June than the previous month. In comparison to one-year ago housing starts were 7.5% higher. The 893,000 seasonally adjusted annual rate was below economists' estimate consensus range of 985,000 to 1,085,000.

Markets remained trading evenly throughout the week ending slightly up with the DJIA gaining 0.90% and the S&P 500 adding 0.52%. Unexpected geopolitical turmoil roiled markets Thursday following the crash of a Malaysian jet near the Ukraine-Russia border. Janet Yellen's Congressional speech early in the week also affected markets as she spoke of overpriced valuations in the biotech, social media and small-cap sectors.

Meanwhile, many financial companies, including DJIA components JPMorgan (JPM) and Goldman Sachs (GS), reported strong earnings beats during the week helping the financial sector. The S&P 500 Financial sector finished up 0.97%. JPMorgan was up 4.33% and Goldman Sachs was up 4.08% for the week.

About the author:JulieYoung789Julie Young is a Chicago-based financial journalist with nine years of experience in the financial services industry. She primarily writes article publications on financial market news and economic trends. Julie holds a Master of Science degree in Finance from Boston College and a Bachelor of Science degree in Finance from the University of Arkansas.

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MarketTalk/HammerForum Imbalance Update: DJIA IMBAL / 16 Outta 30 FOR SALE / SELL-SIDE VOLUMES {HD BUY OUTLIER} / SPU 1971.00

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  Most Popular Earnings Expectations For The Week Of July 14: Big Banks, Tech Giants And More UPDATE: Barclays Upgrades Apple, Has High Expectations For Near Term GT Advanced Technologies Down Sharply On iPhone Production Concerns Phone Arena Reports Apple's 5.5-inch iPhone 6 Could be Delayed Until 2015 Stocks To Watch For July 14, 2014 Perrigo Rumored To Be On Block; 'Market Source' Sees 25% Premium Related Articles () Exclusive: Physicians Realty CEO Discusses Legislation, Interest Rates Doral Financial Corporation Successfully Signs Asset Transaction WTO Says U.S. Steel Tariffs Run Afoul Of International Rules Sothebys Confirms Teaming With eBay To Offer High-End Art Pacific Ethanol Surges Following Report UPDATE: Targacept Official Release Confirms Phase 2b Trial in TC-1734 Did Not Show Superiority to Donepezil Around the Web, We're Loving... We're Now Hiring Real-Time Journalists for our Newsdesk!

Weekly CFO Sells Highlight

According to GuruFocus Insider Data, the recent CFO sales were: American Tower Corp, Western Refining Inc, and Foot Locker Inc.

American Tower Corp (AMT): EVP & CFO Thomas A Bartlett sold 50,001 Shares

On 01/21/2014, EVP & CFO Thomas A Bartlett sold 50,001 shares at an average price of $83.70. The price of the stock has increased by 9.49% since. American Tower Corp has a market cap of $36.27 billion and its shares were traded at around $91.64. The company has a P/E ratio of 62.70 and P/S ratio of 10.32 with a dividend yield of 1.34%. Over the past 10 years, American Tower Corp had an annual average earnings growth of 12.90%. GuruFocus rated American Tower Corp the business predictability rank of 3-star.

American Tower Corp announced their 2014 first quarter results with revenues of $984.1 million and gross profit of $723.32 million; the net income was $202.5 million. The 2013 total revenue was $3.36 billion, a 17% increase from the 2012 total revenue. The 2013 gross profit was $2.5 billion, a 16% increase from the 2012 gross profit. The 2013 net income was $551.3 million.

On 07/09/2014, EVP, Int'l Operations William H Hess sold 80,000 shares at an average price of $90.45. The price of the stock has increased by 1.32% since. On 04/1/70214, Director Raymond P Dolan sold 10,000 shares at an average price of $83. The price of the stock has increased by 10.41% since. On 04/01/2014, EVP, Chief Admin Officer & GC Edmund Disanto sold 50,000 shares at an average price of $81.24. The price of the stock has increased by 12.8% since.

Western Refining Inc. (WNR): CFO Gary R Dalke Sold 20,000 Shares

On 07/08/2014, CFO Gary R Dalke sold 20,000 shares at an average price of $40.58. The price of the stock has decreased by 0.22% since. Western Refining Inc. has a market cap of $4.15 billion and its shares were traded at around $40.49. The company has a P/E ratio of 14.70 and P/S ratio of 0.36 with a dividend yield of 2.27%.

Western Refining Inc. announced their 2014 first quarter results with revenues of $3.73 billion and gross profit of $319.6 million; the net income was $85.55 million. The 2013 total revenue was $10.1 billion, a 6% increase from the 2012 total revenue. The 2013 gross profit was $821.76 million, an 11% decrease from the 2012 gross profit. The 2013 net income was $276 million.

On 06/23/2014, Director Ralph A Schmidt sold 25,000 shares at an average price of $42.08. The price of the stock has decreased by 3.78% since. On 05/29/2014, Sr. VP – Treasurer Jeffrey S Beyersdorfer sold 5,000 shares at an average price of $41. The price of the stock has decreased by 1.24% since. On 05/16/2014, President and CEO Jeff A Stevens sold 334 shares at an average price of $39.64. The price of the stock has increased by 2.14% since.

Foot Locker Inc. (FL): EVP and CFO Lauren B Peters sold 25,000 Shares

On 07/10/2014, EVP and CFO Lauren B Peters sold 25,000 shares at an average price of $50.75. The price of the stock has decreased by 1.52% since. Foot Locker Inc. has a market cap of $7.23 billion and its shares were traded at around $49.98. The company has a P/E ratio of 16.40 and P/S ratio of 1.11 with a dividend yield of 1.64%. Over the past 10 years, Foot Locker Inc. had an annual average earnings growth of 6.30%.

Foot Locker Inc. announced their 2014 second quarter results with revenues of $1.87 billion and gross profit of $646 million; the net income was $162 million. The 2014 total revenue was $6.5 billion, a 5% increase from the 2013 total revenue. The 2014 gross profit was $2.13 billion, a 5% increase from the 2013 gross profit. The 2014 net income was $429 million.

On 04/17/2014, Director Jarobin Jr Gilbert sold 3,000 shares at an average price of $45.42. The price of the stock has increased by 10.04% since. On 03/26/2014, Director Matthew M McKenna sold 2,175 shares at an average price of $46.08. The price of the stock has increased by 8.46% since. On 03/19/2014, SVP & Chief Accounting Officer Giovanna Cipriano sold 16,459 shares at an average price of $46.41. The price of the stock has increased by 7.69% since.

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Uber cheaper than New York City taxi - for now

Hailing Uber is cheaper than using a traditional yellow cab, at least temporarily. NEW YORK (CNNMoney) Uber, the controversial car-hailing app, is waging war in New York City.

The company is temporarily cutting rates by 20% in the Big Apple, making it cheaper to get a ride from Uber than from a yellow cab, the company said Monday in a blog post.

While the rate cut is an experiment, it could become permanent if demand goes up, said Josh Mohrer, general manager for Uber in New York City.

Uber lets customers request a car with a smartphone app. Using your phone's GPS, Uber sends its closest driver to your location. The fare is charged directly to your credit card once the ride is complete.

The rate cut applies to UberX, the company's lower-end service, but not to UberBlack, which sends a higher-end vehicle, or UberSUV.

An UberX ride from Grand Central Station to the Financial District, for example, will now cost about $22, down from about $28. The same ride in a city cab will cost between $24 and $28, depending on the time it takes to get there, said a spokesman for the NYC Taxi and Limousine Commission.

Tip is already included in the Uber rate, unlike the traditional cab's fare.

But Uber rates depend on traffic and other variables, too. The company's dynamic pricing model leads to fares that grow by as much as eight fold during periods of extreme demand, like winter snow storms and New Year's Eve.

The NYC Taxi and Limousine Commission is "committed to maintaining high standards for safety and consumer protection," said chair Meera Joshi in a statement.

"As long as services meet those standards, the consumer can choose which service best serves their needs, whether that's based on price, vehicle type, base location, or something else entirely," she said.

Uber is a four-! year old company that operates in 140 cities and 40 countries. Its latest round of funding valued the company at $18.2 billion.

  Inside Uber's billions

Uber is slashing fares in other cities, too. Rates in Atlanta and San Francisco have already been cut 25% this summer. Demand went up after Uber slashed rates in cities like Boston and Chicago, Uber's Mohrer said. He is expecting the same result in New York and other cities.

While the company is growing rapidly, it has also drawn criticism. Most recently, European taxi drivers in cities such as London, Paris, Berlin and Milan protested against Uber. They say the way Uber charges clients break local rules on the use of taxi meters.

But the protests backfired, serving as free publicity for Uber and a surge in demand for its service.

JPMorgan exec loves getting his hands dirty

NEW YORK (CNNMoney) A check engine light went off inside Bill Eigen's mind while listening to his auto and truck repair customers in 2007.

As Ben Bernanke assured lawmakers the U.S. would avoid an economic storm, Eigen's clients were telling him the exact opposite. Truckers complained of slashed loads, canceled routes and delayed maintenance.

Those ominous conversations prompted Eigen, who oversees $38 billion at JPMorgan Asset Management, to get defensive ahead of many peers by moving heavily into cash heading into the financial crisis.

"It's good to get your hands dirty and find a balance between what's going on in the white collar world and the world of dirty hands and filthy fingernails," Eigen told CNNMoney, while taking a break from changing the power steering pump on his 1995 Ford Bronco.

The Boston-based portfolio manager is a rare finance exec who spends his days off fixing up cars with mechanics and talking shop with truckers. In fact, Eigen believes his weekly conversations with truckers give him a leg up because they are among the most economically sensitive workers in the world.

"I don't know why more people don't do this stuff. So many people like proper historical charts. But you know what? We've never been in a period like this," said Eigen, alluding to the trillions of dollars of artificial money the Federal Reserve has pumped into the economy.

Instant economic data: That's why each Saturday Eigen and his seven-year-old son make a point to visit his Central Massachusetts repair shop, which has a staff of about 11 full-time employees, including a pair of managers who take care of the day-to-day operations.

"Those Saturday mornings are precious to me," said Eigen, who has owned a majority stake in the profitable business for the past dozen years.

They are also valuable to the clients in Eigen's bond funds, including the Strategic Income Opportunities Fund (JSOAX), Eigen said clients are "fascinated' by the on the ground insights he shares during monthly calls because "there's nothing more valuable than real-time data."

Open invitation to Janet Yellen: So what is Eigen's side business telling him about the economy today?

"We saw business fall off a cliff in 2007. You have the complete opposite now. We're booked solid," he said, addi! ng that the shop is enjoying its best year since 2003.

  3 charts explain stocks' bull run

Trucks are actually coming in ahead of schedule for maintenance, signaling they are running more frequent and heavier routes -- a positive sign for the economy and likely stock prices.

"I'd love Janet Yellen to come into the shop one day and talk to these people instead of pooh-poohing how bad the economy is," said Eigen, whose official title is chief investment officer for absolute return and opportunistic fixed income.

'Check engine light is on': The Fed chief's recent comments suggest the easy money punch bowl fueling stock and bond prices isn't going away just yet, despite healthier labor and inflation metrics.

That dynamic, coupled with low volatility and "awful" liquidity in the fixed income markets, has Eigen worried about a rapid rise in bond yields.

"The check engine light is on in the fixed income market, but no one wants to diagnose what the problem is. They continue to drive the car. That can lead to catastrophic failure," he said.

Unlike many on Wall Street, Eigen doesn't feel the pressure to reach for returns because he is an absolute return manager. That means he's focused on just generating positive returns and avoiding losses, compared with relative return fund managers who try to beat their peers or a given benchmark.

"I don't want to run the world. I'm not trying to make history here," said Eigen. "You have a lot of people stretching for yields -- a lot of the same things you saw in 2007. But when you invest in fixed income, it should be preservation of capital first."

Eigen said the rush to chase yields sometimes makes him feel like he's the "only sane one in! the room! ."

Maybe. But he's clearly one of the only ones in the conference room regularly sporting grease up to his biceps.

5 Stocks Under $10 Set to Soar

DELAFIELD, Wis. (Stockpickr) -- There isn't a day that goes by on Wall Street when certain stocks trading for $10 a share or less don't experience massive spikes higher. Traders savvy enough to follow the low-priced names and trade them with discipline and sound risk management are banking ridiculous coin on a regular basis.

>>5 Big Trades to Conquer a Correcting Market

Just take a look at some of the big movers in the under-$10 complex from Thursday, including American Apparel (APP), which soared higher by 21%; Everyware Global (EVRY), which ripped to the upside by 17%; Telik (TELK), which jumped higher by 9.7%; and Samson Oil & Gas (SSN), which trended up 9.4%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.

One low-priced biotechnology stock that recently ripped to the upside was Prana Biotechnology (PRAN), which I highlighted in June 26's "5 Stocks Under $10 Setting Up to Soar" at around $2.15 a share. I mentioned in that piece that shares of Prana Biotechnology recently formed a double bottom chart pattern at $1.90 to $2 a share right above its 50-day moving average. This stock was just starting to spike higher right above those support levels and it was beginning to move within range of triggering a major breakout trade above some key overhead resistance levels at $2.22 to $2.35 a share.

>>5 Stocks Insiders Love Right Now

Guess what happened? Shares of Prana Biotechnology started to trigger that breakout a few trading sessions later with decent upside volume flows. Shares of PRAN have continued to trend higher since that article with the stock tagging an intraday high on Wednesday of $2.75 a share. That represents a fat gain of close to 30% in a very short timeframe for anyone who bought PRAN in anticipation of that breakout. I don't think PRAN is anywhere near done going higher, so traders should now watch for $2.75 to its gap-down-day high from April at $3.24 to get taken out with volume for the next major leg higher to begin.

Low-priced stocks are something that I tweet about on a regular basis. I frequently flag high-probability setups, breakout candidates and low-priced stocks that are acting technically bullish. I like to hunt for low-priced stocks that are showing bullish price and volume trends, since that increases the probability of those stocks heading higher. These setups often produce monster moves higher in very short time frames.

>>5 Rocket Stocks to Buy for Earnings Season

When I trade under-$10 names, I do it almost entirely based off of the charts and technical analysis. I also like to find under-$10 names with a catalyst, but that's secondary to the chart and volume patterns.

With that in mind, here's a look at several under-$10 stocks that look poised to potentially trade higher from current levels.

Wave Systems

One under-$10 technology player that's starting to trend within range of triggering a big breakout trade is Wave Systems (WAVX), which develops, produces and markets products for hardware-based digital security in the U.S. and internationally. This stock is off to a hot start so far in 2014, with shares up sharply by 57%.

>>5 Tech Stocks to Trade for Gains

If you take a glance at the chart for Wave Systems, you'll see that this stock has been basing and consolidating for the last few weeks, with shares moving between $1.35 on the downside and right around $1.50 on the upside. This base is occurring right above its 200-day moving average and just below its 50-day moving average. Shares of WAVX counter-trended higher on Thursday while the market dropped. That move is now starting to push shares of WAVX within range of triggering a big breakout trade above some near-term overhead resistance levels.

Traders should now look for long-biased trades in WAVX if it manages to break out above some near-term overhead resistance levels at $1.49 to $1.50 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.51 million shares. If that breakout gets started soon, then WAVX will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $1.59 to around $1.65 a share. Any high-volume move above those levels will then give WAVX a chance to make a run at $1.70 to its recent gap-down-day high of $1.90 a share.

Traders can look to buy WAVX off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $1.35 to $1.30 a share. One can also buy WAVX off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Wet Seal

An under-$10 multi-channel specialty retailer that's starting to move within range of triggering a near-term breakout trade is Wet Seal (WTSL), which operates stores that sell fashionable and contemporary apparel and accessory items for female consumers. This stock has been destroyed by the bears so far in 2014, with shares down sharply by 65%.

>>3 Big Stocks on Traders' Radars

If you take a look at the chart for Wet Seal, you'll notice that this stock recently formed a double bottom chart pattern at 80 cents per share. That bottomed formed after shares of WTSL downtrended badly from around $2.85 to that 80 cent low over the last six months. Shares of WTSL have now started to rebound off that double bottom support zone and off a near-term uptrend line. That move is starting to push shares of WTSL within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades is WTSL if it manages to break out above some near-term overhead resistance levels at Thursday's intraday high of 95 cents per share to around $1 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 1.53 million shares. If that breakout kicks off soon, then WTSL will set up to re-test or possibly take out its next major overhead resistance levels at $1.11 to $1.20 a share. Any high-volume move above those levels will then give WTSL a chance to tag its next major overhead resistance levels at $1.27 to $1.37 a share.

Traders can look to buy WTSL off weakness to anticipate that breakout and simply use a stop that sits right below Thursday's intraday low of 83 cents per share or around that major support at 80 cents per share. One can also buy WTSL off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

NII Holdings

Another under-$10 technology player that's starting to move within range of triggering a major breakout trade is NII Holdings (NIHD), which provides wireless communication services under the Nextel brand name to businesses and individuals. This stock has been absolutely destroyed by the bears so far in 2014, with shares off sharply by 77%.

>>4 Stocks Rising on Big Volume

If you take a glance at the chart for NII Holdings, you'll notice that this stock recently formed a double bottom chart pattern at around 57 cents to 54 cents per share. That bottomed was tagged after shares of NIHD ripped higher in early June from its 43 cents per share to its high of around 76 cents per share. Shares of NIHD are now starting to flirt with its 50-day moving average of 63 cents per share and it's quickly moving within range of triggering a major breakout trade above a key downtrend line. That downtrend line has acted as tough resistance for the last month, so a move above it with volume could signal a trend change for shares of NIHD.

Traders should now look for long-biased trades in NIHD if it manages to break out above that key downtrend line that starts right around 66 cents per share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 4.81 million shares. If that breakout triggers soon, then NIHD will set up to re-test or possibly take out its next major overhead resistance levels at 75 cents to 76 cents per share. Any high-volume move above those levels will then give NIHD a chance to potentially tag $1 a share if the momentum buyers can take back control of this stock.

Traders can look to buy NIHD off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at 57 cents to 54 cents per share. One can also buy NIHD off strength once it starts to bust above 66 cents per share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Magellan Petroleum

Another under-$10 stock that's starting to trend within range of triggering a big breakout trade is Magellan Petroleum (MPET), which explores for, develops, produces and sells crude oil and natural gas in the U.S., Australia, and the U.K. This stock has been on fire so far in 2014, with shares up sharply by 108%.

>>5 Stocks Hedge Funds Love This Summer

If you look at the chart for Magellan Petroleum, you'll see that this stock recently formed a major bottoming chart pattern over the last month at $1.93, $1.92 and $1.96 a share. Shares of MPET are now starting to spike higher just above those support levels and it's quickly moving within range of triggering a big breakout trade above some key near-term overhead resistance levels. It's also worth noting that shares of MPET counter-trended higher on Thursday as the market dropped, which could be signaling that there are few large sellers in the stock here.

Market players should now look for long-biased trades in MPET if it manages to break out Thursday's intraday high of $2.20 a share to some more near-term overhead resistance at $2.26 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 496,315 shares. If that breakout hits soon, then MPET will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $2.52 a share. Any high-volume move above that level will then give MPET a chance to tag $3 to $3.50 a share.

Traders can look to buy MPET off weakness to anticipate that breakout and simply use a stop that sits right below that triple bottom support zone around $1.96 to $1.92 a share. One can also buy MPET off strength once it starts to move above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Biota Pharmaceuticals

One final under-$10 biopharmaceuticals player that looks ready to trigger a big breakout trade is Biota Pharmaceuticals (BOTA), which focuses on the discovery and development of anti-infective products in Australia. This stock has been rocked hard by the sellers over the last three months, with shares off sharply by 48%.

If you take a glance at the chart for Biota Pharmaceuticals, you'll notice that this stock has been making higher lows over the last month or so after a number of sharp moves higher. That pattern has formed a strong uptrend line support zone for shares of BOTA that so far has held up. Shares of BOTA are now starting to take out its 50-day moving average of $2.97 a share. This stock moved above that key technical level on Thursday as it counter-trended against the overall market weakness. Shares of BOTA are now quickly moving within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in BOTA if it manages to clear a key downtrend line that starts at Thursday's intraday high of $3.09 a share to some more near-term overhead resistance at $3.16 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 168,789 shares. If that breakout materializes soon, then BOTA will set up re-test or possibly take out its next major overhead resistance levels at $3.52 to around $4 a share.

Traders can look to buy BOTA off weakness to anticipate that breakout and simply use a stop that sits just below some key near-term support levels at $2.88 to $2.74 a share. One can also buy BOTA off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

To see more hot under-$10 equities, check out the Stocks Under $10 Setting Up to Explode portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>5 Stocks Set to Soar on Bullish Earnings

>>3 Big Stocks on Traders' Radars

>>3 Big-Volume Stocks in Breakout Territory

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Candy Crush almost sweetens Wall Street

  Candy Crush maker wins Wall Street points NEW YORK (CNNMoney) It almost looked like "The Return of the KING" on Wall Street Monday.

Almost.

Candy Crush saga has entranced everyone from British actresses to New York Times columnists. But investors never bought into its "delicious" rewards.

King Digital Entertainment (KING), the parent company that makes Candy Crush, sold its stock for the first time to the public in late March at $22.50 a share with a lot of fanfare. People dressed as the company's infamous candies danced around the New York Stock Exchange.

The ideal scenario -- for a stock to bounce on the day of its initial public offering (IPO) like GoPro (GPRO) -- never happened. King tanked, ending its first day of trading at $19 and still hasn't fully recovered.

Things finally seemed to be turning around for King in July. Last week the stock hit the IPO price for the first time, and the stock even opened above $23 Monday.

A report from Piper Jaffray had upgraded the stock to "overweight," the investment bank's top grade for shares.

"We are upgrading King and raising our price target to $28 (from $19)," the report said.

The big concern about King is that it's a one-game wonder. After all, what other well-recognized game does the company have beyond Candy Crush?

But Piper Jaffray is optimistic. The research note points out two of the company's games, Pet Rescue and Farm Heroes, have both stayed in the top 15 highest grossing iPhone apps for the past six months. And the next big thing for King could also be here soon.

"We expect Candy Crush Soda, slated for launch later this year, will prove to be a catalyst for KING shares," the report said. While the Soda game could "cannibalize" players from the original Candy Crush series, it could become just as big and keep players engaged.

The enthusiasm from Piper Jaffray comes on the heels of a similar report last week from JP Morgan that p! ointed out the company's fat cash cushion and its growth potential.

The shine from the positive reports didn't last long, though.

By Monday afternoon, King stock was back below $21.

5 Rocket Stocks to Buy for Earnings Season

BALTIMORE (Stockpickr) -- Earnings season officially kicks off on Tuesday, when Alcoa (AA) reports its second-quarter numbers to Wall Street. With U.S. stocks pressing up against all-time highs this summer, the stakes are higher this quarter: good earnings numbers could help keep bears quiet about the record price tag on stocks.

>>5 Stocks Insiders Love Right Now

Meanwhile, price action continues to point higher. Despite some corrective action this morning, last week added 1.25% to the S&P 500, a hefty week that puts year-to-date performance at 8.54% when dividends are factored in. That puts the big index on track to record 17.6% gains for 2014, a big performance considering last year's earth-moving rally.

But as well as the broad market is performing this summer, there's one category of stocks that's stomping it. I'm talking, of course, about the "Rocket Stocks."

For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows. In the last 256 weeks, our weekly list of five plays has outperformed the S&P 500 by 80.19%.

>>5 Blue-Chip Stocks to Trade for Summer Gains

Without further ado, here's a look at this week's Rocket Stocks.

Schlumberger

We're starting things off with $153 billion oil field servicer Schlumberger (SLB). Schlumberger has been a spectacular performer in 2014, rallying more than 30% since the calendar flipped over to January. And with bullish analyst sentiment piling into shares of SLB this week, it makes sense to give this energy giant a closer look.

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Schlumberger is the largest oil servicer in the world. The firm's revenue comes from a menu of niche services such as seismic surveys and well drilling and positioning. In a nutshell, SLB's job is to pull oil out of the ground as efficiently as possible. Oil firms turn to Schlumberger because the tasks they need to accomplish are too nuanced or proprietary to pull off in-house. A consistently strong R&D budget means that SLB has been able to differentiate itself from other oilfield servicers thanks to valuable IP. Those investments will need to continue for Schlumberger to keep its edge.

High oil prices have been a major factor in SLB's recent success. The economics of SLB and oil prices are pretty simple: higher energy prices mean that more sites are economically viable for oil companies, and thus Schlumberger can do more work as its customers ramp up production. That makes SLB a good hedge against the ill effects of rising energy costs.

Look out for the firm's second-quarter earnings numbers to hit on July 18.

UnitedHealth Group

UnitedHealth Group (UNH) is the world's largest managed care organization, sitting 85 million members strong. Size has its advantages in the healthcare business, and UNH's unparalleled scale means that the firm has leverage over medical providers, which in turn drives cost-conscious patients to turn to UNH's services. The transition from being a "health insurer" to performing more lucrative (and less stringently regulated) back-office functions means that UNH has a bigger moat than its peers.

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In recent years, UnitedHealth has acquired physician's practices, a move that gives the firm much lower in-network costs. UNH is also one of the few U.S.-based health care providers that have significant overseas exposure. The firm carries significant exposure to Brazil, through a stake in a health insurance provider in 2012, as well as less material exposure to some 125 countries overall. Those are initiatives that a smaller health care firm would have no chance at expanding into -- and both diversification efforts actually help to solidify UNH's core health business.

UNH still carries considerable exposure to businesses that are impacted by the Affordable Care Act. That adds some uncertainty to shares in 2014, when much of the legislation is scheduled to go into effect. Despite the flux in the health space, the Medicare and Medicaid businesses still provide an important chunk of revenues today.

UNH reports its second-quarter numbers on July 17.

Broadcom

Chipmaker Broadcom (BRCM) has seen some impressive price action so far this year: since January, shares of the $22 billion tech name have rallied more than 27%. And that rally could see itself get extended in the second half of the year, as new mobile device releases drive chip shipments onto Broadcom's income statement.

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Even if you don't know the Broadcom name, there's still a good chance that you've used the firm's products – or even carry them around on a daily basis. Broadcom's chips are found in many popular consumer electronics, including the iPhone. Broadcom's semiconductors help devices communicate -- its most popular chips provide networking connectivity such as Bluetooth, GPS and WiFi on a single piece of silicon, and BRCM was one of the first commercial names to perfect all-in-one communications solutions for OEMs.

Considering the high real estate value of mobile device internals, that expertise at shrinking the footprint while expanding the feature set is hugely valuable.

Unlike most of its peers in the semiconductor business, Broadcom doesn't own its own chip foundries. Instead, it outsources those tasks to third parties. While that means that BRCM cedes some profitability to its manufacturing contractors, the fact that BRCM doesn't carry chip factories on its balance sheet (and their associated overhead on its income statement) means that the firm cuts a leaner profile when times get tough. That's a big part of why BRCM is able to boast $3.51 billion in net cash and investments on its balance sheet today.

PetSmart

Americans love their pets -- and that's why pet supply retailer PetSmart (PETM) has seen so much success in recent years. Per capita, we spend more on our pets than ever before, a trend that's been translating into bigger sales numbers at PetSmart's 1,300 big-box stores. With activist investors piling up a big stake in PETM this quarter (the reason for Thursday's big spike in shares), it makes sense to follow suit.

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PetSmart sells pet food, supplies, services and even small pets at its locations. Importantly, approximately 55% of the firm's sales mix comes from consumables, and another 11% comes from services such as grooming and training. Not only are consumables and services typically higher margin -- they're also usually recurring. That means that PETM enjoys a sticky customer base with a big proportion of repeat sales.

The addition of Banfield veterinary clinics at around two-thirds of PetSmart locations provides an important sales driver for the firm. Not only does the strategic relationship with Banfield drive revenue directly, but it also gives pet owners yet another reason to walk through PetSmart's doors and potentially spend money. As more emphasis on higher-quality all natural pet foods and more expensive and elaborate toys and grooming products fill the shelves, PETM stands to grow its already hefty margins.

Analyst sentiment is on the rise this week, so we're betting on shares of this Rocket Stock.

LinkedIn

Last up is LinkedIn (LNKD), the professional social network. There's no doubt about it: LinkedIn has been a horrible performance drag on investors' portfolios this year. Since the start of 2014, LKND's share price has slid by 20% -- but that slump could be about to turn around in the second half of the year, as momentum starts to heat back up and tech names return to favor among investors.

While it may not pack the "star power" of Facebook (FB) or Twitter (TWTR), LinkedIn owns one of the most attractive businesses in the social media space. That's because it's the only social network that's actually monetized users by helping them do what they want to accomplish on the site. While other social media firms earn revenue by distracting their users from what they're trying to do (and getting them to click on ads while stalking their friends, for instance), LNKD makes money by helping users with the task that brought them to the site: find a job, network or hire someone. That seems like a small distinction, but it's critical to LinkedIn's ability to make money off of each user.

With some 290 million users, LinkedIn's value as a professional resource is undeniable today. And that network benefit should keep job hunters and hiring managers coming back, particularly as conventional job sites grow their reputation for being ineffective and impersonal. Look for an important earnings call on July 28, as investors look for LinkedIn to become more consistently profitable.

To see all of this week's Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:

>>One Big Investor Loves This Small Stock -- Should You?

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>>3 Stocks Rising on Unusual Volume

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in the names mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

Why Microsoft, United Technologies, and McDonald's Missed the Dow's Gains Last Week

The Dow Jones Industrials (DJINDICES: ^DJI  ) made history last week, with a rise of 216 points carrying the average above 17,000 and reigniting investor interest in the stock market more broadly. Even though many investors have remained on the sidelines as stocks become increasingly expensive, the bull market shows few signs of stopping, and positive economic data are helping to support company fundamentals within many sectors of the market. Nevertheless, several Dow stocks missed out on the market's overall gains, with Microsoft (NASDAQ: MSFT  ) , United Technologies (NYSE: UTX  ) , and McDonald's (NYSE: MCD  ) being the three worst performers of the week.

Price data by YCharts

Microsoft fell more than 1% as investors weighed whether the tech giant's efforts to become more of a relevant player in high-growth areas of the sector will pan out. New products like the Android-powered X2 show Microsoft's new strategy of aiming to become more platform-agnostic, as the company admits that its lagging market share in the mobile operating system space has given it an insurmountable barrier to domination. Nevertheless, high hopes for the Surface Pro 3 and other proprietary hardware haven't panned out as well as investors had hoped, with Microsoft failing to get traction for the idea that a combination tablet/laptop can effectively meet the needs of users without making too many sacrifices. Despite ongoing strength in legacy software offerings, Microsoft still needs to establish its future direction to satisfy long-term shareholders.

Source: Microsoft.

United Technologies dropped almost 1%. The decline seems inconsistent with the general mood among investors, especially as fears about the first-quarter drop of 2.9% in U.S. gross domestic product start to give way to greater optimism about a spring recovery. With strength in its commercial aerospace business and support from the military side of its operations, United Technologies still appears laser-focused on its highest-margin opportunities. At the same time, if business conditions keep improving, then the rest of the conglomerate's businesses should benefit from higher demand for building-related services like elevators and heating and cooling systems. This week's drop seems more like a natural pullback from a year and a half of successive new all-time highs than a long-term threat to its future.

Source: McDonald's.

McDonald's fell half a percent as the fast-food giant suffered another defeat in its image. A Consumer Reports poll found that McDonald's ranked at the bottom below 20 of its peers for the perceived quality of its hamburgers. With the company having spent so much attention on revamping its menu to attract customers, ongoing dissatisfaction among some customers about its food has held McDonald's back in an increasingly competitive industry. McDonald's needs to take more dramatic action to restore its good reputation both in the U.S. and around the world.

Leaked: This coming consumer device can change everything
Imagine the multibillion-dollar sales potential behind a product that can revolutionize the way the world shops and interacts with its favorite brands every day. Now picture one small, under-the-radar company at the epicenter of this revolution that makes this all possible. And its stock price has nearly an unlimited runway ahead for early, in-the-know investors. To be one of them and hop aboard this stock before it takes off, just click here.  

Royce Funds Commentary - Chuck Royce on 2Q14

Since the May 2013 low for the 10-year Treasury, we have seen the market shift its focus to more fundamentally and financially stronger companies with attractive long-term prospects—qualities that we have always championed at Royce. Chief Executive Officer and Portfolio Manager Chuck Royce explains why—after more than 40 years—he still feels bullish about active management in the small-cap space and offers his thoughts on equity market leadership so far in 2014, current valuations, and more.

Do you still feel bullish about active management in the small-cap space?

Absolutely. I am more bullish than ever about the prospects for active small-cap management.

We've obviously been biased in favor of active approaches here at Royce for many years, but I think over the last 14 months—dating back to the low for the 10-year Treasury in May of last year—we've reached a point at which active management in small-cap stocks simply makes more sense, at least for long-term investors.

Since that May 2013 low, company fundamentals are becoming more and more important as drivers of share price success.

Rather than invest in a small-cap index vehicle in which approximately 25% of the companies are losing money, I think it's smarter for investors to consider portfolios that look for well-run, financially strong companies with attractive long-term prospects.

Do you think the reign of low-quality stocks has come to an end, then?

For the most part, yes. I think we're entering a phase where quality companies—those with attractive characteristics such as strong balance sheets and high returns on invested capital—should begin to lead.

Certainly they led during the short correction that followed the 2014 small-cap high on March 4. They did not show as much strength when the market was recovering in May and June, but they did well enough to lead the small-cap pack from that early March high through the end of June.

I'd expect something like this pattern to continue at least through the end of the year as the market continues to adjust to the growing normalization of the economy, which I think will continue to expand and pick up momentum.

Why do you think mid- and large-cap stocks have outperformed small- and micro-cap stocks so far in 2014?

First, I think that mid-cap is an area with a number of wonderful, fundamentally sound businesses, and many have also demonstrated strong records of growth over the last few years.

The success of that asset class throughout the entire post-financial crisis cycle has not been a surprise to me. In fact, mid-caps have been an area of significant interest to us for years now.

Large-cap, of course, houses most of the globe's best-known, most stable companies. The small- and micro-cap spaces have, by contrast, high numbers of very speculative companies and are typically more volatile—sometimes much more so in the case of micro-caps. They've also enjoyed very strong runs over the last several years.

The three- and five-year annualized returns through the end of June for the Russell 2000 and Russell Microcap Indexes were terrific on an absolute basis. With equity investors acting more cautiously so far in 2014, the relative breather for small- and micro-cap stocks—and I don't think it's any more than a breather—was also not a surprise.

I should mention that the volatility in the small-cap market as a whole is something that we always try to use to our advantage. We've never seen it as a negative. It's helped to create some tremendous opportunities for us over the years.

Are you anticipating a correction before the end of the year?

I think it's hard to say—corrections can arrive at any time, of course, and it's been a while since we've seen anything significant.

The last downturn of more than 10% for the Russell 2000 occurred in the fall of 2012. We did experience a mild one earlier this year—the Russell 2000 declined 9.1% from its March 4 interim peak through May 15 of this year. Yet share prices recovered so quickly that it barely had time to register.

So while one could argue that we must be due for a decent-sized pullback, my sense is that we're more likely to see a smaller one in the 5-10% range. This is against the backdrop of an economy that looks poised for more rapid growth, a Fed that continues to taper at a healthy clip, and an interest-rate environment in which a steady rate of increase is much more of a "when" than an "if."

All of this is creating a more historically familiar set of conditions for stocks and for investors, so I'm fairly bullish. I could see the second half of the year being pretty similar to the first in terms of the overall returns for stocks.

Valuations on the whole are high, but there are still enough opportunities out there to keep returns in positive territory through the end of 2014.

Chuck Royce is Chief Executive Officer and a Portfolio Manager of Royce & Associates, LLC, investment adviser to The Royce Funds. Mr. Royce's thoughts in this interview concerning the stock market reflect his opinions and, of course, there can be no assurance with regard to future market movements. No assurance can be given that the past performance trends as outlined above will continue in the future.

The Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. Russell 2000 Index is an unmanaged, capitalization-weighted index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the small-cap Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

Also check out: Chuck Royce Undervalued Stocks Chuck Royce Top Growth Companies Chuck Royce High Yield stocks, and Stocks that Chuck Royce keeps buying

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ADP Predicts Big June Job Growth, and Short-Sellers Destroy GoPro's Rally

The Dow Jones Industrial Average (DJINDICES: ^DJI  )  inched up 20 points Wednesday, but all Wall Street cared about is the big official June jobs report due out Thursday morning, just before the stock market closes early for the long holiday weekend.

1. ADP predicts 281,000 new jobs in June
The number of the day is 281,000. Not only is that the number of situps in Cristiano Ronaldo's bench press-less morning workout routine, but it's also the number of new jobs that payroll-tracking firm ADP announced that the U.S. added last month.

Is that good? Good question. ADP's figure is well above the 200,000 economists expected. Plus, the number of new construction jobs brought the industry's total to its highest level since '06. Although U.S. GDP has surprisingly fallen so far in 2014, the solid jobs numbers are a sign that the underlying economy is strong and the manufacturing and production sectors were just temporarily affected by the tough winter.

The takeaway is that these ADP figures are worth tossing some extra bacon on your burger, though they are just an estimate. What Wall Street really cares about is the official number of jobs added last month according to the U.S. government. The Labor Department will announce that number on Thursday morning, just before the holiday traffic begins.

2. Short-sellers ruin GoPro's stock price after four-day rally
I wish we had GoPro'd that insane run that GoPro (NASDAQ: GPRO  ) made in its first days as a publicly traded company -- because it's over. Pessimistic short-sellers who worship the religion of Schadenfreude made sure to fix what they saw as over-excitement about the popular camcorder company, so they sold stocks and nailed the price, sending it down 14% Wednesday.

Short-sellers borrow stock from their brokers so that they can sell it. The plan is to buy it back in the future at a lower price, so these naysayers will profit if GoPro's stock price falls. In the short term, reports came in that it was almost impossible to borrow GPRO stock Wednesday, because so many traders were shorting it.

Why all the hate from Wall Street? Because the company made $60 million profit in the past year and its market cap (the number of shares times the share price) has already ballooned to over $5 billion in the first days of trading. Since last week's IPO, the company has risen 31%, 14%, 13%, and 20% in its only days trading on Wall Street.

The takeaway is that GoPro has a lot to prove. The major selling of the stock Wednesday shows that there are a lot of very skeptical investors out there. Are there enough snowboard-riding and skydiving adrenaline junkies to make GoPro the profits it needs to satisfy investors?

As originally published on MarketSnacks.com

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