The Zacks Analyst Blog Highlights: Alcoa, S&P 500 ETF, Accenture, Oracle and FedEx

 The Zacks Analyst Blog Highlights: Alcoa, S&P 500 ETF, Accenture, Oracle and

PR Newswire

CHICAGO, July 8, 2013

CHICAGO, July 8, 2013 /PRNewswire/ announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Alcoa (NYSE:AA-Free Report), S&P
500 ETF (AMEX:SPY-Free Report), Accenture (NYSE:ACN-Free Report), Oracle
(Nasdaq:ORCL-Free Report) and FedEx (NYSE:FDX-Free Report).


Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.

Here are highlights from Friday's Analyst Blog:

Checking the Investment Landscape, Pre-Q2

As the new guy at Zacks, I thought I would introduce myself by providing a few
thoughts as we enter the upcoming earnings season for Q2.

First, I like to get a lay of the land from a historical perspective and
examine seasonality. July has tended to be a positive month for the S&P 500,
but the breadth of the gain is not strong. Going back to 1929, the S&P 500
has posted an average return of 1.48% in July. Although July has produced the
strongest average monthly return of the year, the S&P 500 has risen 48 of 85
months or just 56.5% of the time.  The average return in the 48 up months has
been 5.14%, while the average return in the 37 down months has been -3.26%.
A number of other months have produced a higher percentage of positive return.

Second, it might be worth noting how the S&P 500 has historically traded
through the Q2 earnings season. Convention wisdom sees Alcoa (NYSE:AA-Free
Report), Zacks Rank 3, as the company which kicks off the season. It is
possible to use the Alcoa earnings event to benchmark the path of the S&P 500
through earnings season. The graphic displays a 5, 10, and 15 year average
price movement of the S&P 500 ETF (AMEX:SPY-Free Report). The price of SPY
was benchmarked to the close of the day before Alcoa released earnings and
examined for 20 trading days after Alcoa's profit release. The chart
indicates the S&P 500 has tended to see price strength early in the Q2
earnings season, but strength seems to fade as the season progresses.
Additionally, the market has performed strongly in the past 5 years relative
to the past 15 years.

Third, there is great uncertainty over the pace of economic growth and the
outlook for profitability in Q3. The JPM Global Composite PMI output
component fell 1.5 to 51.4 in June and shows the global expansion muddling
along. Emerging economies, which have provided support to global growth, seem
to be struggling, Europe continues to fight recession, and the U.S. economy is
throwing off mixed signals. An 80% non-manufacturing to 20% manufacturing
mix of the ISM activity and production components fell almost 3.0 to 52.0 in
June – the lowest since July 2009. However, the economy also created 195,000
jobs in June and payroll growth seems firm. 

Fourth, recent profit releases from Accenture (NYSE:ACN-Free Report), Zacks
Rank #3, Oracle (Nasdaq:ORCL-Free Report), Zacks Rank #3 andFedEx
(NYSE:FDX-Free Report), Zacks Rank #3, were unable to generate great
confidence in the profit outlook, and have probably generated some caution
about the strength of Q2 earnings. Signs of profit strength in early July
could allow the market to reduce its focus on QE tapering and Federal Reserve
policy. Vibrant profit growth could also ease nervousness in the trade over
the idea that higher interest rates will cap the economic expansion.

Fifth, investor optimism is mixed going into earnings season. The American
Association of Individual Investors poll of sentiment showed the bull index up
11.7 to 42.0 and the bear index down 11.4 to 23.8 in the week ending July 3rd.
Individual investors seemed to have turned more constructive on the market. A
pick up in calming words from Federal Reserve members and recent price
strength have helped to boost optimism. However, the CBOE put to call ratio
shows less bullish positioning. The 10 day average was 1.05 through July 3rd
and is consistent with a neutral to cautious view toward stocks. Put volumes
have slightly outpaced call volumes.

Sixth, watch what Alcoa says about end demand for its products. Autos and
aerospace have been strong sectors and were seen growing 1-4% and 9-10%
respectively in 2013 at the end of Q1. Heavy trucks and commercial
construction demand was projected up 2-7% and 4-5% respectively in 2013. A
downgrade to these assessments may influence the demand for cyclical shares,
and the overall economic outlook. Likewise, the market will be sensitive to
the outlook for China's aluminum demand, which had been projected up 11% in
2013. Demand for the World excluding China was expected up 4% in Alcoa's Q1
press release. European and North American aluminum demand was seen down 1%
and up 4% respectively in 2013.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.

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