Investors' skittishness continues on Wall Street today with the S&P 500 vacillating wildly (a 28-point daily range) between positive and negative following the release of important economic data.
Overall, the Consumer Price Index for March increased 0.2%, which is on top of a 0.1% increase from the previous month. If you ask any consumer they'd rather never see the prices for the goods they buy go higher; but modest price increases being passed along to consumers is healthy for business profits and demonstrates improved product demand. In sum, I would deem this another strong CPI report conducive of ongoing economic growth.
As usual, the cement block to the market's rally was disappointing housing data. According to the National Association of Homebuilders, its Housing Market Index came in with a reading of 47 for April, which is a slight uptick from the reading of 46 in March, but lower than economist' expectations that ranged between 50 and 51. What this tells me is that homebuilders remain highly cautious of the scaling back of QE3 and what effect it might have on long-term interest rates. Remember, long-term Treasury yields help determine 30-year mortgage rates, and if yields rise the demand for home purchases may dry up.
By days end the S&P 500 had managed to decisively hit both sides of the needle and finished higher by 12.37 points (0.68%) to close at 1,842.98.
Topping the charts today was small-cap oil and gas exploration company FX Energy (UNKNOWN:FXEN.DL), which rose 19.1% after reporting this morning that its Tuchola-4K well had reached its primary objective, the lower Zechstein Ca1 formation at 2,740 meters. The company further drilled an additional 70 meters which demonstrated strong gas saturation, leading the FX Energy's VP of operations, Andy Pierce, to declare "the Tuchola-4K well up to this point exceeds our expectations." Investors should keep in mind, though, that it's one thing to find assets and it's an entirely different thing to recover them successfully and consistently. Until FX Energy can deliver that consistency, and push beyond breakeven profits, I'd suggest watching from the sidelines.
Consumer products and appliance retail chain Conn's (NASDAQ:CONN) was another notable gainer, up 14.5% on the day after two insider purchases were disclosed. W.R. Stephens Jr. and Elizabeth Campbell, each owners of more than 10% of Conn's outstanding shares, purchased 152,746 shares and 106,034 shares on the open market, respectively. Often when large beneficial owners are making purchases on the open market next shareholders it's a sign of good times to come. Conn's isn't particularly expensive at just 10 times forward earnings, even after today's monstrous run higher, but its earnings miss in a previous quarter hit its share price pretty hard. Traditionally this is a low-margin industry where lower P/E's are often merited, so I'm not as optimistic that shares are still attractive following today's run higher.
Lastly, social media networking giant Twitter (NYSE:TWTR) added 11.4% following two intriguing news events. First, Twitter announced that it had purchased privately held social data provider Gnip for an undisclosed amount. The two already had a four-year working partnership, but the idea here is that Twitter will now be able to offer specialized data to more businesses so they can properly focus their advertising efforts on the right target audience.
Also, as reported by The Wall Street Journal earlier today, Daniel Graf, the overseer of Google's (NASDAQ:GOOGL) (NASDAQ:GOOG) mobile maps operations, announced he was joining Twitter as its new vice president of consumer products. Since the Google maps app is one of the most popular apps in existence, I'd certainly say that Graf did a good job leading the division. With Twitter really trying to boost its mobile presence Graf's appointment could mark an important catalyst in that transition. Despite this good news, I would caution investors to be careful considering that Twitter is valued at more than 200 times forward earnings and 35 times trailing 12-month sales.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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