Last week was volatile for stocks, with interest-rate worries prompting market fluctuations. Despite the swings, the Dow Jones industrial average remained within 3 percent of its May 28 all-time closing high of 15,409.39. After the release of the monthly job reports Friday, the market shot up more than 150 points.
Attribute the volatility to fears of interest-rate increases and a preponderance of negative profit warnings. Recent guidance from S&P 500 companies for the June quarter has also been negative.
A more substantial pullback would not be surprising, as the market has advanced without interruption since mid-November. We are at the point where we could use a short downturn.
While interest-rate fears have received most of the blame, a number of warnings are floating around to confuse the average investor. Rising bond yields and falling profit expectations are hurting the relative appeal of stocks, especially where the primary draw is dividend income.
For now, however, the Dow is still in the bullish camp and quality stocks are available at reasonable valuations.
Two Town Crier “50” stocks made headlines last week.
• Symantec Corp. (SYMC; $22.26) released its fourth-quarter results last month, reporting its operating margin at 14.4 percent, compared with 11.4 percent for the same quarter last year. Symantec’s net income totaled $188 million, down from $559 million a year ago. Last year the Mountain View-based company benefited from a joint venture stake sale to Huawei, contributing to the year-over-year change.
“In a year of significant leadership changes and development of a new company strategy, the team remained focused on running the business to deliver better than expected results,” said Steve Bennett, president and CEO of Symantec, a security software maker.
Symantec’s share price has increased nearly 55 percent in the past year, exceeding the performance of the broader market during the period. The stock price should continue to rise.
Analysts at The Street deem Symantec stock a buy – with a high price of $30 – noting that the company’s strengths are evident in revenue growth, stock price performance, valuation levels, profit margins and financial position.
• Electronic Arts Inc. (EA; $23.08) scored some press last week, with a Wall St. Cheat Sheet headline asking: “Is Electronic Arts Really the Worst Company in America?” The author of the article, Dan Moskowitz, immediately answered, “absolutely not,” though he did cite revenue as a major problem. The worst company in the world, he wrote, doesn’t have a profit margin, a strong balance sheet and increased online exposure.
Electronic Arts stock vaulted to a 52-week high Friday at $23.66 per share.
The Redwood City firm develops, markets, publishes and distributes game software content. It also provides services for video-game consoles, personal computers, tablets and electronic readers. Founded in 1982, Electronic Arts sells its products through mass-market retailers and specialty stores.
The next generation of games from Electronic Arts – Madden NFL 25, NBA Live, Battlefield 4 and several all-out multiplayer warfare games – was announced Monday, after the Town Crier’s press deadline.
Recent analysts’ reports have upgraded Electronic Arts stock to a hold or a neutral, with a mean target price of $21.50 and a high of $26.