Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
The three-day losing streak for the broad-based S&P 500 (SNPINDEX:^GSPC) is now history, despite a mixed day for economic data and a subpar earnings report from tech giant Apple.
Helping push the broader market higher following a weak start to earnings season was home-price and consumer-confidence data. The Case-Shiller 20-city Index demonstrated a robust 13.7% year-over-year gain, signaling that as home inventories remain low, the price prospective homebuyers are willing to pay is rising, which would bode well for the homebuilding sector. Similarly, a January Consumer Confidence reading of 80.7 is a nice improvement from the reading of 77.5 registered in December. This would imply that Americans are viewing their own financial situation more favorable than in the previous month.
Conversely, December's durable-goods orders were an absolute disaster, with a 1.6% decline in December, excluding transportation, when market forecasts had called for an expansion of 0.6%. This reduction in heavy-goods items is discouraging for industrial and tech companies and may be a sign that the overall recovery isn't as strong as the 4.1% GDP growth in the third quarter would imply.
By day's end, the S&P 500 digested this mixed data with investors ultimately pushing the iconic index higher by 10.94 points (0.61%) to close at 1,792.50.
Leading all companies to the upside today was flat-rolled carbon, stainless steel, and tubular product producer AK Steel (NYSE:AKS), which advanced by 18.7% after reporting better-than-expected fourth-quarter results. For the quarter, AK Steel saw its revenue rise 3% to $1.46 billion as it earned $0.09 per share in EPS. By comparison, Wall Street had forecast $1.45 billion in revenue and just $0.05 in EPS. AK Steel noted that it was aided by improved automobile sales, which pushed production modestly higher, as well as a 2% increase in pricing. Although AK Steel is scheduled to return to full-year profitability in 2014, I'd probably hold back on that optimism a tad until the company demonstrates more consistent production and pricing growth.
Shares of clinical-stage biopharmaceutical company Idenix Pharmaceuticals (UNKNOWN:IDIX.DL) added 17% after announcing that it had raised money through the direct offering placement of its common stock. According to Idenix's press release, it raised $106.7 million by selling 16.42 million shares of stock to The Baupost Group, which, after the deal is completed by week's end, will own 35% of Idenix's outstanding shares. This extra capital will allow Idenix to further pursue the development of its hepatitis-C pipeline, and Baupost's majority ownerships leaves open the possibility that a buyout could be in Idenix's future. As for me, though, I'd caution against getting overly excited here, as three of Idenix's lead compounds have been scrapped since 2010, with a fourth currently on clinical hold by the FDA. Idenix simply can't get a drug past mid-stage studies -- and even if it did, the hepatitis-C race for a cure may long be over by then.
Finally, shares of Alimera Sciences (NASDAQ:ALIM), a biopharmaceutical company that focuses on prescription ophthalmic pharmaceuticals, jumped 14% on the day after also announcing that it had obtained a commitment from non-affiliated institutional investors to purchase $37.5 million in Alimera's common stock. This is good news for Alimera shareholders, as the cash generated from this stock placement will allow it ample capital to be used for the commercialization of back-of-the-eye disorder drug, Iluvien, in Europe. While certainly good news, Iluvien has also failed to inspire the Food and Drug Administration on more than one occasion in the United States. Unless Alimera can somehow get this key drug approved in the U.S., I'm not certain it'll be able to support its lofty valuation.