Consumer confidence hits 7-month low

WASHINGTON (AP) — U.S. consumers' confidence in the economy fell in November to the lowest level in seven months, dragged down by greater concerns about hiring and pay in the coming months.

The Conference Board said Tuesday that its index of consumer confidence dropped to 70.4 from 72.4 in October. The October reading was higher than initially reported, but still well below the 80.2 reading in September.

Home prices : Case-Shiller report shows slowing monthly gains

Confidence plunged in October on worries about the shutdown. The November decline, however, was mostly due to concerns about the next six months.

Less optimism among Americans could slow the holiday shopping season and weigh on economic growth. Consumer spending drives 70 percent of economic activity.

But spending patterns don't always closely follow measures of confidence. Americans sometimes shop more even when they say they are less optimistic.

That's what happened last month. Despite a sharp fall in confidence in October, consumers spent 0.4 percent more at retail stores and restaurants than in September.

Strong auto sales accounted for about half the gain. Restaurants also reported a healthy increase in spending. Americans also spent more on furniture, electronics and clothing. There were some signs of caution: sales at grocery stores were flat and department stores reported only slightly higher sales.

Lower gas prices and a recent pickup in job gains could help maintain Americans' ability to spend, even as their confidence wanes.

Employers added an average of 202,000 jobs from August through October, up from just 146,000 in the previous three months.

And lower gas prices have put more money in consumers' pockets. Prices fell for nine straight weeks to the lowest level in nearly two years before moving up slightly in the past two week. The average price for a gallon of gas nationwide Monday was $3.28.

Economic growth is expected to slow in the current October-December qu! arter, partly because consumer spending growth is likely to be moderate. The economy expanded at a 2.8 percent annual rate in the July-September quarter, but most economists expect it will slow to about a 2 percent rate or lower in the fourth quarter.

First Take: What’s ahead in the “Yellen Years”

The Senate's genteel handling of Janet Yellen, nominee for chairman of the Federal Reserve, means that the Fed's easy money policies will continue for some time to come. For investors in bond funds, that's bad news followed by worse news. In the Yellen Years, interest rates will remain low for some time, and then they will rise.

The Federal Reserve has two mandates: To keep inflation low and to keep unemployment low. In the wake of the 2008 financial meltdown, the Fed pushed its key short-term federal funds rate to nearly zero. In November 2008, the Fed also began buying longer-term Treasury securities and mortgage-backed securities to push down longer-term interest rates.

Yellen hearing: Senators grill nominee on Fed policies, tapering

Not surprisingly, bond funds rallied strongly. Bond prices rise when interest rates fall. In the three years between September 2007 and August 2010, intermediate-term bond funds soared 67.7%, according to Morningstar. During the same period, large-company blend funds fell 23.9%.

Again, not surprisingly, investors flocked to bond funds during that period, and dropped stock funds like an irritated cobra. But if you listen to Yellen's testimony, she's sounding a warning to bond investors: You've pretty much had your fun.

Although Yellen wouldn't say when the Fed's bond-buying program would end, she did say that she expected interest rates to rise eventually. Rising rates mean lower bond prices. And at current interest rates — the 10-year Treasury note yields just 2.70% — interest payments won't be enough to ease the pain. Already, the average intermediate-term bond fund has fallen about 2.09% — including interest — so far this year.

Bond bear markets tend to be less painful than stock downturns, but they can last an awfully long time. Interest rates rose from the end of the Great Depression to 1981, when the 10-year T-note hit 15.84%. Treasury securities were called "certificates of confiscation."

Currently, the Fed is targe! ting a 2% inflation rate, measured by its favorite inflation gauge, the personal consumption expenditureprice deflator. The PCE is still comfortably below that level, having gained just 0.9% the past 12 months.

But, as John Lonski, Chief Capital Markets Economist, Moody's Analytics, notes, it's likely that the Fed will overshoot its target, meaning that it's also likely that long-term bond yields will rise higher than the Fed would like, at least temporarily. If you're a bond investor, you should consider looking at funds that invest in shorter-term bonds. They will offer lower yields, but somewhat greater protection against rising interest rates.

You should also consider bonds issued by companies — or even states — whose credit ratings will improve when the economy does. You don't have to go all the way to junk-bond levels. But a short-term corporate fund that dabbles in bonds with less-than-stellar credit ratings might be the best way for bond investors to navigate the Yellen Years.

Consumer Confidence in U.S. Economy Falls to 5-Month Low

Jennifer Whitney/Bloomberg via Getty Images NEW YORK -- U.S. consumer sentiment fell to a five-month low in September, with Americans worried that higher interest rates will put a damper on the housing market and overall growth, a survey released Friday showed. The Thomson Reuters/University of Michigan's preliminary reading on the overall index of consumer sentiment fell to 76.8 in September, the lowest since April. That was below August's 82.1 and the 82.0 reading economists had expected this month. Survey director Richard Curtin attributed the decline to "growing concerns that higher interest rates will diminish the pace of economic growth as well as job gains." He added that a "cooling housing market has also affected homeowners' sense of personal financial progress." Americans' outlook is not much sunnier. A gauge of consumer expectations fell to an eight-month low of 67.2 from 73.7 in August, with only one in four households expecting to be better off financially in the year ahead. The survey's barometer of current economic conditions fell to a five-month low of 91.8 from 95.2 last month. Mortgage rates have risen sharply in recent months as markets prepare for the Federal Reserve to reduce the amount of bonds it buys each month to support U.S. recovery. Investors expect the first reduction in the nearly year-old program to be announced at next week's Fed policy meeting. That has already started to slow a rebound in the housing market, which, thanks to Fed support, had seen a rise in loan demand and prices over the last year. Applications for home loans declined and refinancing activity has slowed sharply. Consumers were also apprehensive about fiscal policy and another potential battle in Washington over raising the government's legal borrowing limit, the survey showed. If the trend persists, economists fear it could further depress consumer sentiment and spending. A separate report on Friday showed U.S. retail sales, while up for a fifth straight month, rose less than expected in August. "If changes in monetary and fiscal policies....act to slow economic growth, declining confidence could lengthen and deepen the slowdown," Curtin said, but said confidence should rebound if these fears prove not to have such a negative effect.

Bank Merger Arbitrage Spreads and Pipeline Indicate Different Trends

Sterne Agee is out with a key report discussing merger arbitrage spreads and trends in mergers and acquisitions in the banking sector. While the M&A trade has been on the back burner of late, there have been some developments in the arbitrage spreads for pending M&A deals and in the short interest for the buyers. The firm feels that merger arbitrage spreads seem reasonable at this time, but buying shares of the acquirers could bring higher returns based on such a high building short interest that is happening against the acquirers.

The recently announced PacWest Bancorp (NASDAQ: PACW) and CapitalSource Inc. (NYSE: CSE) merger was called a beacon in an otherwise dim bank M&A landscape so far in 2013 as it was only a $2.3 billion deal total. So far, 2013 looks to register lower in banking M&A activity than the lean years of 2011 and 2012 at only about $9.1 billion in total so far, versus almost $17 billion for each of the past two years. There are only 13 pending transactions that exceed $100 million, and two of these are expected to close imminently.

The M&T Bank Corp. (NYSE: MTB) and Hudson City Bancorp Inc. (NASDAQ: HCBK) transaction is the only pending deal of 2012 vintage due to various regulatory concerns. MTB currently has 9% short interest outstanding and PACW 15%. Another merger covered is the deal between Provident New York Bancorp (NASDAQ: PBNY) and Sterling Bancorp (NYSE: STL), and the balance are simply too small for us to warrant effort.

Arbitrage spreads in general are currently priced around 3.4%, and this is called fairly reasonable, according to the Sterne Agee banking team. Buying the spreads on these two largest transactions would yield about 10.4% and 8.9% on an annualized basis for merger-arb investors.

Sentiment is swinging against the buyers as mergers appear to be the only viable short-term solution to meaningfully grow bank balance sheets. The short interest remains at a fairly high at 6% to 7% of outstanding shares with an average of 17 days to cover.

Microsoft Keeps Gaining Smartphone Momentum

Microsoft (NASDAQ: MSFT  ) Windows Phone is finally making a dent in the market. After initially launching in 2010 with an innovative new tile interface, replacing the legacy Windows Mobile platform, the software giant has now grown to become the No. 3 smartphone player.

There have been numerous reasons why Windows Phone is gaining relevance and momentum, but none are more important than strengthening relationships with OEMs and carriers. After all, for a software maker to sell its operating system, it needs someone to make the hardware and someone else to deliver the actual service.

Microsoft is getting second chances at numerous domestic carriers. Windows Phone 7 didn't fare very well on Verizon Wireless initially, but Big Red just recently launched a slew of Windows Phone 8 devices. Microsoft's history with Sprint is similar, with the HTC Arrive running Windows Phone 7 being quietly discontinued last year. Sprint is now about to launch the HTC 8XT, its first Windows Phone 8 device, in a week.

On the OEM front, Nokia (NYSE: NOK  ) is easily Microsoft's most important hardware partner. The Finnish company ships the majority of all Windows Phones in the world today, but that hasn't stopped Microsoft from expanding its OEM partnerships. Thus far, Microsoft's most prominent hardware partners are Nokia, Samsung, and HTC. Let's add another major vendor: LG Electronics.

LG's director of India Soon H. Kwon recently told Light Reading India that the South Korean company has a Windows Phone 8 device in the works. The smartphone is still in development at LG's South Korean headquarters. LG continues to gauge the market opportunity and hasn't specified any launch plans quite yet. Kwon reiterated LG's commitment to Google Android -- even though a separate LG exec said the company has no interest in building a new Nexus for Google -- but is confident that Windows Phone will keep gaining momentum as Microsoft continues to put more weight behind it.

LG recently ranked as the No. 3 smartphone vendor in the world behind Samsung and Apple. It more than doubled unit shipments in the first quarter relative to the prior year, and is preparing to launch a new Android flagship, the Optimus G2. LG is a vendor that Microsoft definitely wants in its corner as it continues to strengthen its position with carriers and OEMs alike.

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Where Is Google's Next Android?

The newest versions of Android are typically announced in detail at Google (NASDAQ: GOOG  ) I/O, which took place last month. The search giant unveiled a slew of new offerings, including a new streaming music service All Access. The two most notably absent announcements were a second-generation Nexus 7 and any mention of the next version of Android. Where is Android 5.0?

Casually known as Key Lime Pie (what other desserts start with K?), VR-Zone is exclusively reporting that Google is preparing to launch Android 5.0 in October. The company is hoping to optimize Android for devices with more memory. That also happens to be about when the company's Motorola subsidiary is expected to launch its X Phone, implying that Googorola could have a joint launch event ahead of the busy holiday shopping season.

Another important thing missing at Google I/O was talk of Nexus phones. Some investors had been expecting a new Nexus 5 smartphone, but would have to settle with a "Google Edition" of Samsung's Galaxy S4. Current Nexus 4 manufacturer LG has reportedly become disenchanted with making low-margin Nexus phones for Google's benefit. Ahead of I/O, there were rumors that Key Lime Pie's development was being delayed, in part to give OEMs more time to launch their devices running 4.2.2 Jelly Bean before updating the platform.

If Google intends to launch Android 5.0 along with the X Phone in October, it's going to be a busy fall. Apple (NASDAQ: AAPL  ) is launching new products "this fall" and if the Mac maker sticks to an approximate one-year product cycle, we could be talking about new iPhones and iPads all due out at the same time. Apple just announced iOS 7, the next major version of its own mobile operating system, which will likely launch alongside the new hardware also.

Even once Google announces Key Lime Pie, Android's platform fragmentation means that a significant portion of its user base won't benefit. Android software updates are notorious for delays related to carriers and OEMs, with Nexus devices getting the timeliest updates.

Tim Cook pointed this out during Apple's event last week, showing that 93% of iOS users are on the latest version.

Source: Apple.

An incredible 37% of Android's installed base is still using 2.3 Gingerbread, which was released in 2010. Only a third of Android users are on the latest version Jelly Bean, and the figures that Google provides don't include all the distinct forks out there.

With iOS 7, Apple is catching back up with design, an area where Google has surpassed the iPhone maker in recent times. Can Google put more heat on Apple this fall?

As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

Wall Street stock futures rise

Wall Street stock futures gained a bit early Tuesday as the political standoff in Washington continued.

Dow Jones industrial average index futures rose 0.1%, Standard & Poor's 500 index futures gained 0.2% and Nasdaq index futures traded 0.2% higher.

On Monday, Day 7 of the government shutdown over a budget dispute, the Dow fell 136.34 points, or 0.9%, to 14,936.24 and the S&P 500 slumped 14.38 points, or 0.9%, to 1,676.12. The Nasdaq dropped 37.38 points, or 1%, to 3,770.38.

Anxiety over an Oct. 17 deadline to raise the nation's debt ceiling is starting to eat away at investor sentiment.

MONDAY: Dow drops below 15,000 on Day 7 of shutdown

In Asia on Tuesday, Japan's Nikkei index inched up by 0.3% to 13,894.61, while Hong Kong's Hang Seng index was up 0.9% to 23,186.75. China's Shanghai composite was up 1% to 2,195.90.

Benchmarks across Europe extended recent losses. Britain's FTSE 100 index fell around 0.3% while Germany's DAX index lost 0.1%.

Benchmark crude oil for November delivery rose 5 cents to $103.08 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 81 cents to close at $103.03 a barrel on the Nymex on Monday.

FTSE Shares That Soared This Week

LONDON -- The FTSE 100 (FTSEINDICES: ^FTSE  ) was more upbeat this week, after a number of positive earnings reports from some of the U.K.'s biggest public companies helped send it up 140 points (2.2%) to 6,426. That's still some way down from the five-year high of 6,534 points that the index of top U.K. stocks set on March 12, but it's a nice pullback from recent falls.

Here are four of the companies that gave the FTSE a boost this week.

Standard Life (LSE: SL  )
Insurer Standard Life led the FTSE 100 with a rise of 53 pence (16%) to 387 pence over the week, after the company announced that its total assets under management rose 7% to 233 billion pounds during its first quarter. The company also told us business was doing well in Canada, saying it "remains well placed in the growing pension market." Forecasts for the full year put Standard Life on a P/E of 15, just slightly ahead of the FTSE's long-term average of around 14, and there's a dividend yield of about 4% expected.

ARM Holdings (LSE: ARM  )
A bumper set of first-quarter results sent the price of chip designer ARM Holdings soaring on Tuesday, and it ended the week up 106 pence (12.2%) to 979 pence. Earnings per share surged by 58% to 5.31 pence, after the number of ARM-based chips shipped during the quarter climbed by 35% to 2.6 billion and helped push revenue up 28% to 170 million pounds and pre-tax profit up 44% to 89.4 million pounds. CEO Warren East told us that "ARM's royalty revenues again outpaced the wider semiconductor industry."

Lloyds Banking Group (LSE: LLOY  )
Lloyds Banking Group, which is the result of a series of mergers of Lloyds Bank, Trustee Savings Bank, and HBOS, announced on Wednesday that it is to split off the TSB arm again. A total of 632 of Lloyds' branches will be rebranded as TSB Bank, and the new division will be floated on the stock market. The cooperative had originally agreed (in non-binding terms) to acquire the branches, but Lloyds confirmed that it has pulled out of the deal. Lloyds stock gained 5.4 pence (11.4%) to 52.9 pence by the end of Friday.

Associated British Foods (LSE: ABF  )
Associated British Foods, which owns the successful Primark clothing chain, pleased the market with an upbeat first-half report, sending its stock up 78 pence (4.2%) to 1,925 pence. The six months to March 2 saw revenue up 10% to 6,333 million pounds, with adjusted EPS up 22% to 41.9 pence, and the interim dividend was lifted by 10% to 9.35 pence per share. These results, according to the board, "exceeded our expectations at the start of the year."

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4 Chinese Internet Stocks That Are Better Bets Than Alibaba

Andy Wong/AP Alibaba (BABA) is the new belle of the dot-com ball in China. The e-commerce juggernaut pulled off a record initial public offering in September when it raised $25 billion on the way to becoming a public company. Analysts love Alibaba. They were able to initiate coverage on Wednesday, following the 40-day quiet period that follows an IPO's debut. Only one of its underwriters -- Goldman Sachs -- failed to tap it as a buy recommendation. It's easy to see the appeal. Alibaba helped 231 million active buyers place 11.3 billion orders totaling $248 billion in transactions last year, and it's just getting started. However, the stock, with its nearly $250 billion market cap, isn't cheap. Let's look at some Chinese dot-coms that have been trading longer and could be more compelling bargains. Baidu (BIDU) China's leading search engine posted another blowout quarter on Wednesday, just as analysts were gushing all over Alibaba. The company behind China's largest search engine saw revenue soar 52 percent over the prior year's third quarter. Earnings climbed just 27 percent, but that was twice as fast as analysts were expecting. Baidu is investing in low-margin online specialties including travel, video and mobile app storefronts, and that weighs on bottom-line growth. Baidu remains one of China's biggest winners. It went public nine years ago at a split-adjusted price of $2.70, and now it trades north of $200. Baidu fulfills roughly two-thirds of all queries, and it is rocking at a time when its profitability is still suppressed. 51job (JOBS) Matching employees to potential hires started out with old-school tech for 51job. It got its start by inserting weekly job listings in more than two dozen leading Chinese newspapers. Then the Internet came along, allowing 51job to convert its thick Rolodex and respected brand into a leading online recruiter. It's working: 51job is growing its revenue in the low double digits. It's trading at a reasonable 22 times this year's projected earnings and less than 17 times next year's target. Despite soundly beating Wall Street income forecasts for three consecutive quarters, the stock is trading closer to its 52-week low than its high. That's an opportunity. Vipshop (VIPS) Daily deals and flash sales have burned investors, as Groupon (GRPN) has been a market disappointment. LivingSocial hasn't been able to go public given the lukewarm investing appetite for flash-sales websites. It's different in China, where Vipshop has been one of its biggest success stories. Vipshop offers deals on apparel and other items that only stick around for a few days. The shares have more than doubled this year after more than quadrupling in 2013. The heady growth isn't over yet, with Wall Street pros modeling 115 percent in top-line growth this year. NetEase (NTES) Online gaming stocks have become an investing minefield in the U.S. given the fickle nature of players, but China's been kinder to its leading franchises. NetEase is the company behind "Fantasy Westward Journey," an online game that has proven magnetic for several years. When Activision Blizzard (ATVI) wanted a partner in China to introduce "World of Warcraft" to the world's most populous nation, it chose NetEase, and the successful partnership finds NetEase working on introducing more Activision Blizzard games in China, including "Diablo III." NetEase isn't growing as quickly as it was in its prime, but it's still hitting low double-digit growth. It trades for just 15 times this year's earnings and 13 times next year's estimate. NetEase also pays out a quarterly dividend, something that's rare with Internet stocks. It's a Small World China is risky for investors, and Internet stocks are even riskier. The often-restrictive government is keeping a close eye on cyberspace, assessing the threats and opportunities that it brings to the country. China's stock market also marches to its own beat. It has soared during down years for the rest of the world, and last year the Shanghai Composite took a 7 percent hit when U.S. equity markets rallied. However, there are plenty of intriguing and reasonably priced companies out there. Alibaba is a great company, and it may even wind up being a great stock. However, there are other stocks benefiting from the same trend that don't have the hype of Alibaba baked into their prices. More from Rick Aristotle Munarriz
•Week's Winners, Losers: Amazon On Fire, Walmart Fired On •Pepsi and SodaStream Test-Drive a New Relationship •Is There Life After Kim Kardashian for Glu Mobile?

Media stocks surge after Aereo ruling

  Big win for broadcasters against Aereo NEW YORK (CNNMoney) The Supreme Court's ruling against Aereo was a triumph for the country's broadcasters, and now media stocks are doing a victory dance.

Shares of CBS Corporation (CBS), Disney, (DIS) Comcast (CMCSA), and Twenty-first Century Fox (FOX) jumped Wednesday after the Supreme Court ruled that streaming service Aereo violates broadcasters rights by using tiny antennas to snatch up content on public airwaves.

CBS, whose outspoken CEO Les Moonves had publicly predicted that the nation's highest court would side with the broadcasters, got the biggest boost, bouncing as much as 8% after the ruling before pulling back to a roughly 5% gain.

James Dix, a media stocks analyst with Wedbush Securities, said CBS had the biggest stake in the Aereo outcome because it derives much of its revenue from television advertising and retransmission fees.

Disney and Comcast, which own ABC and NBC, respectively, also moved higher, but Dix said they had less skin in the game because their sprawling media empires also include lucrative cable stations.

But perhaps the biggest winners on the media stocks front were local television owners.

The Sinclair Broadcast Group (SBGI), which owns and operates almost 170 stations and reaches roughly 40% of all U.S. television households, shot up 15% after the ruling.

The Tribune Company (TRBAA) bounced 5%, while the Gannett Company (GCI) rose 4%.

All three companies have local ABC, NBC, and CBS affiliate stations, among others, in their portfolios. Dix claimed these stocks have the most to gain from the Supreme Court's decision, since Aereo was a direct threat to their business model of redistributing broadcast content.

Still, the surge in media stocks was a bit surprising, since many analysts had expected the Supreme Court to side with the broadcasters.

"The overhang of uncertainty is gone," Dix said.

GM recalls 106,000 more vehicles

The 2012 Chevrolet Camaro is part of a new recall from GM. NEW YORK (CNNMoney) The list of General Motors recalls keeps getting longer.

The automaker issued four more recalls Friday, adding 105,688 vehicles to the more than 15.8 million cars and trucks it has recalled worldwide this year.

The new recall affects about 36,000 vehicles including the 2012 Buick Verano, Chevrolet Camaro, Cruze and Sonic, which have a problem that can prevent the airbag from deploying in a crash. The flaw has been linked to one crash where someone suffered an injury.

A separate issue that could prevent the passenger airbag from deploying properly affects 87 Chevrolet Sparks from model years 2012 and 2014, as well as Buick Encores from model year 2013. Another airbag issue affects 37 Chevrolet Corvettes from model year 2014. Neither of those problems have been linked to a crash, the company said.

The largest, but less serious recall issued Friday affects 70,000 vehicles including some Chevrolet Silverado LD and HD models, as well as GMC Sierra LDs, Tahoes, Suburbans and Yukons from model years 2014 and 2015. They have a problem that could disable the audible chime that warns drivers and passengers that a front seat belt is not buckled or that the driver's door is opened while the key is in the ignition. GM is not aware of any crashes or injuries related to the issue. It affects

GM (GM) will send letters to customers letting them know when they can bring their vehicles into a dealership to be repaired.

The new recalls come one day after the company released an internal report examining why it took more than a decade to recall 2.6 million cars for a faulty ignition switch. That problem has been linked to at least 13 deaths. GM CEO Mary Barra announced that 15 employees have been dismissed and five more have been disciplined over the matter.

Jobless rates down in 43 states in April

An improving jobs climate seeped across every corner of the U.S. last month as unemployment rates fell in 43 states, the Bureau of Labor Statistics said Friday.

Highlights:

• Jobless rates in 30 states were below April's national average of 6.3%.

• Thirty-nine states plus the District of Columbia posted gains in nonfarm jobs compared with March.

• All four regions of the country showed statistically significant declines in unemployment. The West still has the highest rate at 7.0% and the South has the lowest, 5.9%. The Northeast's rate was 6.3% and the Midwest's, 6.1%.

North Dakota, whose economy has benefited from a boom in oil and natural gas production, continued to have the nation's lowest unemployment rate at 2.6%, the same as in March. Rhode Island again topped all states with the highest rate, at 8.3%, but that was 0.4 percentage point lower than in March.

Rates ticked up in only two states — in South Dakota, from 3.7% to 3.8%, and in Alabama, from 6.7% to 6.9%.

While many states now show much improved jobless rates than they had during the recession and its immediate aftermath, only North Dakota's rate has fallen to a new historical low, according to the BLS.

Nonfarm employment increased in 39 states and the District of Columbia last month, fell in 10 states and was unchanged in Nebraska.

States with the largest employment gains from March were Texas, up 64,100; California, 56,100; and Florida, 34,000. Over the past year, those three states account for 935,000 additional jobs.

Contributing: Barbara Hansen

A Small-Cap Energy Stock Fueling Up for a Short Squeeze

DELAFIELD, Wis. (Stockpickr) -- Energy -- and specifically the oil and gas complex -- continues to be a bright spot in this market.

>>3 Stocks Spiking on Big Volume

Just take a look at some of the moves in this sector, such as small-cap independent oil and gas player Quicksilver Resources (KWK). That stock is ripping higher today by 7% on above-average volume. Over the last six months, shares of KWK have soared higher by 58%, and the stock is now approaching its 52-week high at $3.67 a share.

Another small-cap oil and gas player that's been on a fire of late is Callon Petroleum (CPE), which is up by more than 40% so far in 2014. This stock is also trending strong today, with shares up by 2.6% at $9.17, within range of its 52-week high of $9.84 a share. One more small-cap oil and gas play that's recently exploded to the upside is Magellan Petroleum (MPET), which has soared higher in 2014 by over 100%.

As you can see, the oil and gas complex is trending strong right now, and small-cap stocks in this space are in play with the bulls. This momentum could be here for a while when you consider the troubling escalations we've seen in the past few weeks in Ukraine. The geopolitical tensions in Ukraine are keeping a bid under the energy market, and unless that situation de-escalates dramatically, then I expect that bid to remain in place.

>>5 Rocket Stocks to Buy for May Gains

This all has me scanning the small-cap energy space for what could be the next big runners. A number of small-cap oil and gas players could very easily be next to make a major run as the momentum players move from stock to stock in the sector looking for opportunity. These small-cap energy names have the capability to make massive moves higher, since many have low floats and lots of shorts.

A perfect example of an oil and gas player that's recently exploded higher and also has a low float and lots of shorts is FX Energy (FXEN), which has ripped to the upside by 30% over the last three months. FX Energy has a tradable float of 50 million shares, and the short interest as a percentage of its float is just over 6%. Just this month, shares of FXEN exploded higher from its low of $3.13 to its recent high of $5.14 a share. Make no mistake, once the big upside volume flowed into FXEN a few weeks ago. the shorts got spooked and covered in a hurry, producing that large spike.

>>5 Stocks Poised for Breakouts

One small-cap independent oil and gas player that's showing up on my scans today that could be capable of a massive move higher soon is Endeavour International (END), which acquires, explores and develops energy reserves and resources in the U.K. North Sea and the U.S. onshore. This company has interests in Alba, Bacchus, Rochelle and other field areas in the U.K., as well as the Pennsylvania Marcellus area, Haynesville producing project areas in Louisiana and Heath Shale Oil Play in Montana. So far in 2014, shares of END haven't joined the small-cap oil and gas party; shares are down by 37%.

That might be about to change, though, since shares of END are starting to look interesting from a technical standpoint, and this stock has a very low tradable float and a massive short interest. This is just the recipe that can produce moves like the ones we've seen in some of the names mentioned above. END could outperform them all if a short-squeeze gets underway that's accompanied by strong upside volume flows.

>>5 Toxic Stocks to Watch Out For

If you take a look at the chart for Endeavour International, you'll notice that this stock was in a massive downtrend from its January high of $7.50 to its recent low of $2.71 a share. During that downtrend, shares of END were consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of END have now started to show signs of coming out of that downtrend, since the stock has trended sideways for the last two months, between $2.71 on the downside and $3.69 on the upside. Shares of END have recently rebounded higher off that $2.71 low to its current price of $3.25 a share and it's now quickly moving within range of triggering a major breakout trade.

Traders should now look for long-biased trades in END as long as its trending above $3 a share or above $2.90 a share then once it breaks out above some near-term overhead resistance levels at $3.31 to $3.36 a share and then once it clears more resistance levels at $3.49 to $3.69 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.11 million shares. If that breakout gets sparked soon, then END could see a monster short-squeeze that takes the stock back towards its 200-day moving average at $4.99 to even $5.50 or $6 a share.

The short-squeeze opportunity is huge here, since the current short interest as a percentage of the float for END is massive at 33%. That means that out of the 29.8 million shares in the tradable float, 9.88 million shares are sold short by the bears. This is a very low float that's being leaned on big by the short-sellers. If the sector strength we've seen recently in the small-cap oil gas names spills over to END soon, then this stock could make the biggest move yet.
The key thing to watch for if that squeeze is going to happen soon, is for shares of END to take out those near-term overhead resistance levels I highlighted with strong upside volume. Traders should watch for large block trades to hit the tape on END if the stock starts to clear those levels soon, because that could mean the shorts are covering knowing full well the sector is in play. Keep in mind, this is just a trading opportunity I see here not a long-term call on END as a great buy. I am simply looking to take advantage of the sector strength on a low float high short interest idea.

-- Written by Roberto Pedone in Delafield, Wis.

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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.

Facebook up as Stifel hikes price to $82

SAN FRANCISCO (MarketWatch) — Shares of Facebook Inc. rallied Wednesday after Stifel raised its price target for the stock, citing "broad acceptance" of the social network's platform by advertisers.

Facebook (FB)  was up 4% to close at $71.57 after Stifel analyst Jordan Rohan raised his price target to $82 from $72, arguing that the Menlo Park, Calif.-based company "continues to gain share of overall marketing spend."

"Our recent channel checks suggest that marketers view Facebook as a strategic communications platform, capable of establishing and reinforcing relationships with consumers," Rohan told clients in a note.

After proving in 2013 that its ads work, he added, "Facebook now stands to receive a significantly higher proportion of clients' marketing budgets, particularly from sophisticated marketers who have committed resources to track the efficacy of Facebook spend."

However, Rohan echoed worries about Facebook's $19 billion acquisition of WhatsApp, which he says makes strategic sense, but "the valuation is still perplexing."

"However, Facebook's core business fundamentals are so strong that investors are likely to give the company leeway to take bigger risks, even at extended valuations," he added.

Other social media stocks posted gains. LinkedIn (LNKD)  was up 2.3% to close at $207.74, while Zynga Inc. (ZNGA)  gained nearly 1% to close at $5.69 and Twitter (TWTR)  was up a fraction to close at $54.38.

Shares of eBay (EBAY)  slipped a fraction to close at $58.86. Investor Carl Icahn again blasted the company's board, saying in an interview with CNBC that he has "never seen worse corporate governance than eBay."

Microsoft (MSFT)  shed 0.8% to close at $38.11, while Groupon Inc. (GRPN)  slipped 1.3% to close at $8.57.

The Nasdaq Composite Index (COMP)  gained 6 points, or 0.1%, to close at 4,358. The Morgan Stanley High Tech 35 Index (MSH)  and the Philadelphia Semiconductor Index (SOX)  were each up a fraction.

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Value Investing Is in Style Again!

Popular Posts: Mr. Market Won’t Be Rushed Into a FallMarkets Are Set for Midterm Classic Recent Posts: Value Investing Is in Style Again! Mr. Market Won’t Be Rushed Into a Fall Markets Are Set for Midterm Classic View All Posts

Welcome back!  For much of 2013, it seemed investors were buying stocks almost willy-nilly, without regard for traditional value benchmarks.  This year, “our” kinds of stocks are coming back, big time.

Just look at Public Service Enterprise Group (PEG).  In 2013, the New Jersey-based electric and gas utility posted a 9.4% total return—very respectable in an ordinary year, but rather blah in a year when the S&P 500 index returned nearly 32%.

Today, Peggy, as old-timers call the ute, reported Q4 earnings ahead of the analyst consensus.  PEG also issued 2014 guidance that topped Wall Street forecasts.  The stock soared 4.5%, a sizable one-day move for any blue chip equity and exceptional for a utility.

As of today’s close, Peggy’s total return for the year to date stands at 14%—more than the stock delivered all last year, despite a flat S&P.  Three cheers for truth, justice and the American Way!

But the good news doesn’t stop there.  Oil and gas producers were seriously out of favor last year, with few arousing more scorn than BP (BP) and Royal Dutch Shell (RDS.B).  Who would want to own BP with its billions of Deepwater Horizon liabilities, and Royal Dutch with its failed Arctic drilling program?

Well, who but us, incurable contrarians!  Lo and behold, both stocks made today’s list of new 52-week highs.

I could go on with many other examples, but you get the point:  The “changing of the guard” we’ve been looking for has arrived.  It’s happening right under our noses.

Of course, all this sudden prosperity creates some problems.  Many stocks have moved up and out of buy ranges.  If you’re thinking of putting new money to work, you’ll need an extra measure of patience and selectivity until the market gives us a pullback longer than the 12-day wonder we had in late January and early February.

In the meantime, consider shoring up the fixed-income side of your portfolio.  If you’re sitting on too much zero-yielding cash, shift some of it to a fund like PowerShares Senior Loan Portfolio  (BKLN).  BKLN invests in corporate bank loans that carry a “senior” claim on the borrower’s assets.

While I wouldn’t want to hold a bank-loan fund through the next recession (defaults would rise, driving down the fund’s net asset value), I don’t foresee much, if any, risk of such an event in 2014.  In other words, I think BKLN is a safe enough parking place for your cash here and now. Current yield:  4%.

If you’re willing to accept somewhat greater fluctuations in your principal value, look into Babson Capital Global Short Duration High-Yield Fund (BGH).  As the name implies, this closed-end fund circles the globe in search of high-yield (“junk”) bonds with short maturities.

BGH also borrows money, at short-term rates, to enlarge its portfolio.  As a result, the fund yields a lip-smacking 8.5% with monthly dividend distributions.

Again, I wouldn’t care to own BGH during a serious economic slump, but I think your money is safe for now.  In 2013, the fund easily outperformed its high-yield peer group with a 13.9% return at net asset value.  So far in 2014, BGH is again powering ahead of the competition.