Face-Off: Microsoft vs. Google

By Taryn Cooper, at 1:12 pm on March 1st, 2010

In the spirit of yesterday’s closing ceremonies at the Olympics, I would say that — much like Team Canada vs. Team USA — a turf-war has erupted between two American-as-Apple-Pie tech companies.  Perhaps you’ve  heard of them.  We have “Microsoft” on one side, and another named “Google” in the defensive zone.

Microsoft has been incredibly vocal with its accusatory stance against Google, suggesting their business is anti-competitive.  Microsoft is no stranger with being accused of monopolistic practices, back in the late-90s going through that themselves.

The thing that stands out to me is whether Microsoft should care or not.  Let’s be fair, these two companies are like Goliath vs. Goliath.  While there is healthy competition in the technology space, each is successful and has their niche in their own right.   While they have similar products, typically Microsoft and Google target different populations but are potentially each other’s biggest competition.

I can’t say whether Microsoft is simply picking on Google because they can, but it seems interesting to me that several outlets today have picked up the idea that Microsoft is encouraging victims of Google to file complaints with regulators on their anti-competitive practices (an idea, that by the way, Microsoft is denying).

It appears as though Google is getting their licks in the media — you know, the whole saying of building something up just to tear it down, etc etc.   And with it’s trouble in China, along with its Google Books drama in the U.S., Microsoft’s deputy general counsel Dave Heiner also wrote in a blog post today that “Google’s way of working with advertisers and publishers makes it hard for Microsoft’s competing Bing search engine to win search volume.”

I wonder how long it will be before Google starts taking its public licks, much like Microsoft did in the late-1990s, for being the monolith it was but it’s still standing and of course, won’t be going away anytime soon.  The same could be said for Google, as it’s going through it’s growing pains of falling out of favor.  We’ve seen evidence of this recently with public fall-out from it’s Buzz launch, which had many more “ifs” involved in its release than answers.  To me though, I think that Google will walk away from this unscathed, as they have a team of lawyers working for them to ensure that whatever may happen quickly goes away.

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Market Jumps in the Afternoon, Fed Raises Rates after the Close

By Robert Perrego, at 5:03 pm on February 18th, 2010

The Dow Jones Industrial Average jumped about 50 points within 15 minutes at 2:15 p.m. this afternoon, adding to slight gains earlier in the day to finish up a solid 83.66 points (+0.81%, 10.392.90).  Travelers Companies Inc. (NYSE: TRV) led the Dow higher gaining 1.91% (+$0.99, $52.).  Wal-Mart Stores Inc. (NYSE: WMT) reported $1.17 per share in earnings before the open this morning, with analysts expecting $1.12.  The world’s largest retailer missed on revenues though ($113.65 billion vs. 114.56) and the market sent the stock into the penalty box, dropping it 1.09% (-$0.59, $53.47).

The S&P 500 gained 7.24 points (+0.85%, 1,106.75) on the day with gains in most all industries except transportation and finance.  The Nasdaq 100 climbed 12.53 points (+0.51%, 1,823.39).

The market traded slightly higher early in the day but with no volatility or major movements.  At 2:15 p.m. there was a jump that one market player attributed to possible short covering.  A software engineer in Texas flew a small plane into a building containing an IRS office, and with the market these days, there were short positions put on in the event a terrorist connection was found.  It turns out that the pilot was more than a little frustrated with the IRS (what a surprise) and left a seven page online rant describing what was (or was not) going on in his head.  As soon as it was apparent that the plane crash was not a hidden terrorist cell or something more sinister, the market pop could have been a short squeeze as all those speculative short positions ran for the exits.  Who says the IRS and short side traders are bad?  On a down note, the IRS is expected to announce new taxes on software engineers to pay for a new building (just kidding).

Microsoft Corp. (NSDQ: MSFT) and Yahoo Inc. (NSDQ: YHOO) got clearance from regulators in both the United States and Europe to combine their search and advertising mojo in an attempt to mount a real challenge to the Goliath of the space, Google Inc. (NSDQ: GOOG), which controls some 66% of the market.  Microsoft gained $0.38 (+1.32%, $28.97) and Yahoo closed higher by $0.10 (+0.65%, $15.54).  Analysts think this combination could have legs as Microsoft’s ‘Bing’ search seems to deliver the goods and Yahoo can now free up some extra time to figure out why they passed on the $34/share buyout offer from Microsoft in 2008.

With today’s gain, the DJIA has closed significantly higher than its 50 day exponential moving average and has some clear sailing ahead of it to the upside.  There is minor resistance in the 10,430 area, but after that it looks like blue skies back towards the 52 week high at 10,725.  It looks like the U.S. stock market has broken free of the Greek tragedy, finally.

Looking at the gold chart shows it is right up against resistance formed by an island reversal, which involves horizontally lined up gaps.  A close above $1,130 in the spot price or $111 by the SPDR Gold Trust (NYSE: GLD) should signal a breakout and a run at its all time highs.  New York spot gold gained $14.20 an ounce today (+1.28%, $1,121.00, 4:16 p.m.)

Nymex crude jumped $1.85 to $79.18 a barrel (+2.39%, 4:19 p.m.).  It is looking like the February 9 call of trading the trend channel of the United States Oil Fund (NYSE: USO) between $35 and $41 is working out.

**********

BREAKING NEWS – The Federal Reserve just raised the discount rate by 0.25% to 0.75%.  This is not the more important federal funds rate.  To put this in perspective, the federal funds rate is what banks lend to each other at for overnight loans, while the discount rate is what rate the Fed lends to banks at.  While raising the discount rate does increase the cost of money, the fact that the federal funds rate is still at 0.25% still allows depository banks access to the cheaper loan.

The big news here is the surprise jack in rates.  The Fed used to always make these changes after a Fed meeting in order to be more predictable.  With the bottom dropping out of the credit markets in 2008, the Fed cut rates without meeting and now it seems they are going to raise them in the same manner.  This is one tool Bernanke can use to keep market players from getting too juiced up on the all the liquidity that has been injected into the system.  Also, this unexpected rise will put the carry trade cowboys on notice to stop shorting the dollar as now they will be less sure as to when a hike in the federal funds rate will come.  This uncertainty will scare them into lightening up on their dollar shorts.

The bad news is, if these cowboys buy their shorts in as now they are afraid of higher rates (which strengthen the dollar), they will be selling their ‘riskier’ assets – stocks and commodities.

Remember those comments earlier in this article about the clear sailing to the old highs – WHOLE NEW BALLGAME NOW FOLKS.

New York spot gold was at $1,121 before the announcement – now it is trading $1,110.90.  The Dow ‘Diamonds’, the ETF for the Dow Jones Industrial Average closed today at $104.17 and are now trading $103.45 in the after-market – translates to down about 72 points on the DJIA.

Do you think those guys that put the short positions on when they heard a plane hit a building with the IRS in it wish they were still short?

Weak Jobs Number Puts Market on the Edge, Obama’s Bank Plan Pushes it Over

By Robert Perrego, at 5:17 pm on January 21st, 2010

Yesterday, the Dow Jones Industrial Average dropped 208 points before recovering to post a 122 point loss on the day.  The S&P 500 also experienced the same deeper drop and recovery into the close.  Looking at the charts for the Dow and the S&P 500 shows that where the two market Indexes closed yesterday, was right on the support of short term uptrend lines that have been in effect since December 17th of last year.  All the market needed to drop was a little push…

This morning before the open, the Jobless Claims came in weaker than expected by 42,000 jobs (482K vs. 440K), and the market dropped a bit off the open.  The 10 a.m. release of a weak Philly Fed survey and a brief released by the White House with details about new banking regulations President Obama had a press conference scheduled for, was enough to push the market over the edge.  In 17 minutes the DJIA dropped 105 points as selling, and possibly the cascading of protective sell stops, took the market on a one way trip lower.  An hour later Obama was on TV, and as he announced his plans a second wave of selling drove the market to its day low at down 229 points.

The Dow Jones Industrial Average lost 213.27 points (-2.01%, 10,389.88) on the day making the drop of the last two days total 335 points, which is the biggest two day loss since June of last year.  The S&P 500 dropped 21.56 points (-1.89%, 1,116.48) and the Nasdaq 100 was off 17.38 points (-0.93%, 1,850.57)

There seems to be a difference of opinion about how Goldman Sachs Group, Inc. (NYSE: GS) will fare under the newly proposed legislation.  Dick Bove of Rochdale Securities LLC says you should buy Goldman on the dip, but Michael Hecht at JMP Secutities and Matt Albrecht at Standard and Poor’s disagree, saying the bank will get hit harder than their brethren.  Goldman announced earnings this morning before the opening bell and crushed the analysts estimates of $5.20 a share by a full $3.00 ($8.20).  With a weak and slowly trending lower market, Goldman stock was off about a dollar when the first market slide hit.  This first slide only took the stock down three more dollars and when Obama got on TV, Goldman was trading at about $164.  Fifteen minutes later, as Obama gave details of his plan, 7 points evaporated off of Goldman’s stock as it traded as low as $156.77.  Calls to Goldman and other banks all got pretty much the same answer of “we don’t really know until we see all the details” which sounds to me like; “It is only proposed legislation and let’s just see what they get signed into law after we pay our lobbyists a small fortune to go talk to some politicians in D.C.”  Goldman stock rebounded to close the day down $6.92 (-4.12%, $160.87).

The newly proposed regulation has at its heart a ban on commercial banks engaging in proprietary trading.  Obama seems to believe that this type of law would be a safeguard against a future financial meltdown similar to that which occurred over the last 18 months.  Never mind the fact that proprietary trading did not have much to do with financial crisis, or that American International Group, Inc. (NYSE: AIG), Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) did not engage in any proprietary trading at all, were at the epicenter of the crisis and together cost the TARP well over $200 billion.  Never mind the fact that Goldman and every other large bank that did engage in proprietary trading have paid back, with interest, every dime the Government loaned them.  The question is, is this type of legislation motivated by actually trying to regulate and make the markets safer, or is it politically expedient to attack the big banks to score a victory after the election in Massachusetts earlier in the week?

Google Inc. (NSDQ: GOOG) reported after the close today, with some of the bigger market players anticipating a large beat.  The analysts estimate for earnings was $6.50 a share and one player I spoke with cited the fact that Google’s numbers were never taken lower during the past year, and that, with the economic pick up the reported earnings beat should be sizable.  In today’s down market, Google closed up $2.57 at $582.57.  The search engine giant reported earnings of $6.79 a share, beating the $6.50, but only by 4.4%.  The stock immediately dropped in after hours trading as it seems others anticipated a larger earnings beat and started to sell.  The stock is currently down 25 points in the after market at 557 (5:00 p.m.).  This pattern seems to be keeping form with selling the tech earnings after the beat expectations (see Intel and IBM earlier in the week).

New York spot gold dropped $17.80 to $1,093.50 and Nymex crude lost $1.92 a barrel to $75.82 as just about everything got hit today.

Selected earnings for Friday:

BBT 0.21 before the open, EXC 0.85, GE 0.26 bmo, HOG -0.32 bmo, JCI 0.29, KMB 1.25, MCD 1.02 bmo, SLB 0.64 bmo, STI -0.75 bmo.

China and Massachusetts Drive the Market Lower

By Robert Perrego, at 5:15 pm on January 20th, 2010

Mining stocks got hit today as the market took back what was gained Tuesday on the hopes of a Republican win in Massachusetts.  Hardest hit was Silver Standard Resources, Inc. (NSDQ: SSRI), which dropped 8.72% (-$2.02, $21.15).  Yesterday we tacked on 116 points on the hopes of a 41st vote for the Republicans in the U.S. Senate.  Well, the party was last night, the Republican candidate Scott Brown won and today the market posted its worst loss since November.  Hangover.  The party was being all happy about the possibility the Repub’s could block the Dem’s grand spending plans which would keep the debt, spending and taxes down.  The hangover is realizing that if Obama does not print the greenback into oblivion, if all of a sudden the trillion dollar health plan may not pass, then the expectations for a weak dollar will decrease.  Now ask yourself what the carry trade cowboys, who are short the dollar and long stocks and commodities, are going to do?

The Dow Jones Industrial Average dropped 122.28 points today (-1.14%, 10,603.15) with 24 of 30 components finishing lower. The S&P500 lost 12.19 points (-1.06%, 1,138.04) and the Nasdaq 100 led the charge lower as weak tech caused the index to close down 27.53 points (-1.45%, 1,867.95)

International Business Machines (NYSE: IBM) reported after the close yesterday and beat earnings, and also took first place in leading the DJIA lower today losing $3.89 (-2.89%, $130.25).  They sold the Intel Corp. (NSDQ: INTC) earnings after beating estimates and, starting in the after-market yesterday, they sold the IBM earnings beat as well.  Keep an eye on what happens to the eBay Inc. (NSDQ: EBAY) earnings announced after the close today and Google Inc. (NSDQ: GOOG), which reports after the close tomorrow.  If both these companies beat, and they sell the stock off after, this quarters reporting play is to sell tech earnings after the announcement.

The banks were strong today relative to the rest of the market as Bank of America Corp. (NYSE: BAC) reported a loss of 60 cents.  This loss included a one-time charge of $4 billion for a TARP payment spurring an Oppenheimer analyst to raise his rating on the stock.  BofA led the DJIA higher today gaining 17 cents (+1.04%, $16.49).  Bank of New York Mellon Corp. (NYSE: BK) posted a 49 cent per share profit after charges and 60 cents before, which beat the analysts’ estimate of 51 cents, powering the  stock higher by 4.84% (+$1.43, $30.96).  Wells Fargo & Co. (NYSE: WFC) posted an 8 cent per share profit with the analysts expecting a 1 cent loss.  Wells Fargo stock dropped 1.62% (-$0.46, $27.82).  Morgan Stanley (NYSE: MS) posted 29 cents per share profit with the analysts expecting 36 cents, causing the stock to drop 1.70% (-$0.53, $30.63)

Other than a Republican winning the Senate seat long occupied by Ted Kennedy, the big news today was a report that Chinese authorities asked some commercial banks to stop giving loans for the rest of the month of January.  China’s top banking official denied the report, but then again they had nothing to do with the Google hack last week right?  The Shanghai Composite dropped 2.9% on the report and a tightening of the loans in China will slow growth there and here as well.  The more buildings China builds the more Caterpillar, Inc. (NYSE: CAT) tractors they buy.

The combined news of the election in Massachusetts and the loan tightening in China caused the PowerShares DB US Dollar ETF (NYSE: UUP) to gap higher this morning on the open.  The UUP gained 1.22% on the day (+$0.28, $23.12) and broke its short term down trendline.  The stochastics for the UUP are reversed at a low level and heading higher so, with this breaking of a trendline and the stochastics all bullish, the chart points up for the dollar.

As a result of the report that China is slowing down their economic growth and that the dollar might be given a reprieve from death row, commodities got hit hard today.  Steel got hit for 3.11%, coal lost 2.86%, copper down 2.68% and gold down 2.39%.  New York spot gold lost $27.20 an ounce (-2.39%, $1,1140.40, 4:50 p.m.) and Nymex crude was down $1.59 a barrel (-2.00%, $77.73)

UPDATE: eBay earnings came in at 44 cents a share vs. the expected 40.  Revenue was reported to be $2.4 billion with expectations of $2.29.

Selected earnings for Thursday, January 21, 2010:

ACS 0.99 after the close, AXP 0.56 atc, APH 0.49, BNI 1.22 atc, COF 0.45 atc, CMA -0.49 before the open, ED 0.76, CAL -0.07 bmo, ELX 0.16 atc, FCS 0.17 bmo, FITB -0.31 bmo, GS 5.20 bmo, GOOG 6.45 atc, ISRG 1.71, ESI 2.36 bmo, KEY -0.39 bmo, LM 0.31 bmo, PNC 0.77, PPG 0.73 bmo, PCP 1.64 bmo, UNP 1.04 bmo, UNH 0.73 bmo, WDC 1.36 atc, XRX 0.22 bmo

Economic reports for Thursday:

Jobless Claims 8:30 a.m. 440K expected

Leading Indicators 10 a.m. 0.7%

Philadelphia 10 a.m. Fed Survey 18.0

Big Pharma Strong, Google vs. China?

By Robert Perrego, at 5:31 pm on January 13th, 2010

Merck & Co. (NYSE: MRK) was upgraded on a strong drug pipeline by Credit Suisse and the stock responded by running up 3.67% (+$1.38, $38.93) to close at its highest level in 20 months.  During a day that saw “Wall Street CEOs” grilled by the Financial Crisis Inquiry Commission (FCIC), stocks staged a rally that carried the Dow Jones Industrial Average to new highs not seen since early October of 2008.  While the market was focused on the big news about the banks and Google’s China conflict, Big Pharma staged a stealth rally which carried not only Merck, but Johnson & Johnson (NYSE: JNJ) and Pfizer Inc. (NYSE: PFE) to new closing highs.  All three of these companies are Dow Jones components and J&J and Pfizer are the two largest pharmaceutical companies by market capitalization traded in the United States.  J&J closed up 41 cents at $64.97 (+0.63%) and Pfizer added 44 cents to $19.21 (+2.34%).

The Dow Jones Industrial Average rose 53.51 points (+0.50%, 10,680.77) with 22 of 30 companies positive for the day.  Two tech components of the DJIA, Cisco Systems Inc. (NSDQ: CSCO) and Intel Corp. (NSDQ: INTC), did their part gaining 1.81% and 1.70% respectively.  The strongest major index on the day was the Nasdaq 100, which gained 24.34 points (+1.30%, 1,886.13) and the S&P 500 rose 9.46 points (+0.86%, 1145.68)

Google Inc. (NSDQ: GOOG) is considering pulling out of China after getting Gmail accounts of human rights activists hacked.  Google said the hacks were very sophisticated and may have even led to the theft of some company proprietary technology.  A distant second in the search market to Baidu.com in China, Google has feuded with the Chinese Government over censorship and the privacy of their data and the data of their users for some time now, and this may be the last straw.  The big question is whether or not Google is bluffing and will they actually leave the largest consumer market on the planet that also has the hottest economy right now?  Walking away from 25% of the world’s population is never an easy thing to do, no matter how good your reasons are.  Baidu, Inc. (NSDQ: BIDU) jumped $52.99 (+13.71%, $439.48) on the news while Google dropped $3.39 (-0.57%, $587.09)

Oil dropped to under $80 a barrel on warmer weather as Nymex crude lost $1.16 to $79.63.  Gold opened up a few dollars after yesterday’s slide resulting from China raising their interbank interest rates and then started trading lower.  By lunch the shiny yellow metal had formed an intra-day double bottom and New York spot gold trended higher for the rest of the day finishing higher by $9.80 an ounce (+0.87%, $1,137.60, 4:54 p.m.)

The Fed beige Book was released at 2 p.m. and provided some upward momentum for stocks as it stated that 10 of 12 Fed regional districts reported economic conditions are improving.  The growth is slow with pockets of weakness and concern about consumer spending and credit.  Credit quality is deteriorating and loan demand is dropping as economists worry about a double-dip recession.  Current debate is how well the economy will do on its own, once the governmental stimulus ’sugar-high’ is over.

Just dumping stimulus money into an economy does not mean a recovery as stimulus spent wisely is an investment with returns, while pork stimulus or non-investment spending does not spur job creation and the positive effects fade with time.  This is very similar to the old proverb; “Give a man a fish he eats for a day, teach a man to fish he eats for a lifetime.”  Give the economy wasteful stimulus spending and we have a bounce in the market and a double-dip recession, spend those trillions wisely and hopefully we get a full blown recovery.

Tomorrow we get the Retail Sales (+0.4%, +0.2%) and Jobless Claims (437K) numbers at 8:30 a.m. and then Business Inventories (+0.2%) at 10 a.m.