After falling Friday following the March jobs report, the Dow Jones Industrial Average (DJINDICES:^DJI) continued to slide 167 points Monday as investors lower their expectations ahead of the first-quarter earnings season.
1. Tech stocks keep getting slammed
March and April have not been kind to tech stocks. Since reaching all-time highs in early March on tech-mania excitement, things have been downhill for Amazon.com (NASDAQ:AMZN) and Facebook (NASDAQ:FB). Both of those same stocks have plummeted by over 14%. You name a young tech stock, and there's a good chance it's down 10% in the past month.
On the other hand, mature tech stocks that pay quarterly dividends in order to give cash to shareholders have done well in the same period. Grandpa's favorite tech stocks -- like Microsoft, IBM, and Hewlett-Packard -- are all up over 3% the past month.
Investors like money, and young tech stocks offer imaginary future money (and trendy apps). Instead of giving profits to shareholders (i.e., dividends) Facebook and Amazon.com are making crazy purchases and investments ($19 billion WhatsApp acquisitions and supposed delivery drones). The market's punishment of tech's young growth stocks may signal a desire by investors for safer bets that don't require such faith in future payouts.
2. Coffee prices surge on Brazilian weather
Your morning routine is about to get a tad more expensive. Forecasts for more dry weather in the coffee belt of Brazil, the world's largest grower and exporter of coffee beans, sent coffee prices soaring -- Arabica bean prices are up almost 11% since Thursday, their biggest two-day jump in two months.
It's all about Arabica beans. Forget what your hipster barista tells you about the coffee blends he makes from home in Brooklyn -- Arabica coffee enjoys high demand worldwide for its mild flavor and gourmet intrigue. It just so happens that Brazil produces half the world's Arabica beans, and investors worry that a few more months of dropping supply caused by drought will continue to send prices up.
The takeaway is that the report released from the National Coffee Council on Monday didn't taste great. The past two months were the driest in Brazil in 30 years, and obnoxious coffee connoisseurs know that you need moisture to mature coffee cherries. Arabica prices were already up 75% so far this year, but now the council is already lowering its 2014 production estimates from 44 million 60-kilogram bags to 40.1 million. Someone get us an alcoholic drink instead.
3. IPOs and quarterly earnings reports ahead this week
Bring on the IPOs. Investors are gearing up for another exciting week on the floor. Untested virgin shares will experience the bop and bounce of stock market trading for the first time this week. Fourteen companies are expected to sell shares to the public markets for the first time in their initial public offerings, including sexy names like ... an auto lending bank and a cheap hotel chain.
Don't let the bland names fool you -- the IPOs should be a thrill. The U.S. government bailed out automotive lending company Ally Financial, and it's ready to dump this annoying investment out of the public taxpayers' hands. La Quinta hotels is also ready to "check in" to the public domain by raising funds on the public stock markets.
Don't forget Alcoa's (NYSE:AA) kick-off party as it unofficially brings in the first-quarter earnings season Tuesday. The steel company will report what it earned in the first three months of 2014, the first of many companies that will have Wall Street's attention the next weeks. Analysts are actually expecting a drop in profits compared with last year, as the economy seems to be searching for its way (or batteries for the GPS, at least).
- National Federation of Independent Business' Small Business Index
- First-quarter rernings reports: Alcoa
MarketSnacks Fact of the Day: While "drip coffee" maker sales have stagnated, "coffee pod" machine sales have grown by 6 times in the past six years, with over 12 million units sold in the U.S. last year.
As originally published on MarketSnacks.com