3rd Calendar Quarter Ends, Earnings Season Begins

As a tumultuous 3rd Calendar quarter comes to a close, market volatility grabbed most of the trading headlines as the markets felt the effects of the credit crisis and a Fed induced Rate Cut Rally.

What the end of the quarter brings is wave after wave of Corporate Earnings. The markets have seen earnings from the Financials coming over the last couple of weeks, highlighted by Goldman Sachs (GS) tremendous expectations beat. The first week of October is highlighted by a couple gadget/phone makers as Palm (PALM) reports Monday and Research In Motion (RIMM) reports Thursday. The two smart phone competitors have been going in opposite directions and Palm hopes its latest cheap device can put a dent in the momentum that's been grabbed by the BlackBerry and Apple's (AAPL) iPhone.

Overall the upcoming earnings week is fairly calm as a storm of earnings will come in the last three weeks of October.

Markets Rise Modestly Thursday on Subdued Volume while China Stocks Soar

North American market were higher across the board Thursday as Investors were buying cautiously towards the end of the quarter. Many however sat on the sidelines as trading volume was lower across the board than in previous weeks. The Dow, Nasdaq and S&P all saw gains today of about .3%. In Canadian Markets the TSX was up almost triple digits which translated to about .7% in the green.

Google (GOOG) went in front of the Government today to defend its decision to buy DoubleClick. A group of challengers led by Microsoft (MSFT) had complained that this deal would give Google too much power over Internet Advertising. Google's dominance in search ads, coupled with DoubleClick's reporting and distribution services would give Google too much control according to Microsoft. Yes, I understand the irony of Microsoft complaining about Anti-Trust issues hot on the heels of its appeal loss in Europe for the very same infractions. Talk about the Pot calling the Kettle black! Google seems confident enough that the deal would be allowed to go through as it points out that Microsoft had also been in the bidding for DoubleClick and lost, having to settle for competitor aQuantive.

In the airline sector a large order was placed by British Airways (BAIRY). The company leveraged heavy competition between Boeing (BA) and Airbus and took orders from both airplane makers. The Airline placed an order for 12 Airbus A380 planes and 24 Boeing 787s with an option to buy even more planes should needs arise. British Airways climbed almost 5% on the news while Boeing was only slightly higher.

The other continuing big stock growth story is China. Many Chinese based companies have done extremely well this week and the run was capped off today with even more substantial gains. China Eastern Airlines (CEA) was up 15%, China Telecom (CHA) was up 15% and 18% on the week and China BAK Battery (CBAK) was up 19% and has doubled in the last 5 days. Another Chinese mobile/Internet play KongZhong (KONG) was really flying today as the stock jumped 72% rebounding from year-lows recently.

While its tempting to jump in and try to ride more momentum here, caution is the name of the game. With these type of gains an cool, calm and collected investor would sit back and see whether the now inflated prices can be sustained going forward to a quick trade. While I would particularly be cautious about the Airline industry, China Telecom is a great play on the expanding mobile world and KongZhong was beaten down from the $10s to the high $3s before rebounding now to $8.50 on inklings of hope and raised estimates. Due to government control and very strict laws the Chinese business world is one not fully understood by a majority of casual investors and as such I don't recommend jumping in blind hoping to catch a wave.

Disclosure: Author is long GOOG and holds no position in any other companies mentioned

Markets up Wednesday, Dow gains 99 led by General Motors

American Markets enjoyed another positive day with the Dow Jones finishing to the plus side by 99 points. The big push was provided by General Motors (GM) as it enjoyed a 9% gain. GM and the United Auto Workers Union reached a deal to renew auto worker contracts and restructure GM obligations to workers and the union. The threat of a long-term strike was lifted from the shoulders of GM and the stock jumped accordingly.

Also enjoying positive sentiment were the Investment Banks as Bear Stearns (BSC) jumped over 7% on reports that the big man himself, Warren Buffett is eyeing a stake in the company. These reports went on to say that several big banks are also interested in purchasing as much as 20% of the company. This news had investors feeling pretty good about the potential for these companies, specifically the investment banks, to overcome the losses and the mistakes that were made during the sub-prime credit situation.

In technology stocks, momentum for Research In Motion (RIMM) kept going strong as the company continues to defy gravity and bloated P/E valuations. The rule of 80-leads-to-100 was in full effect for the BlackBerry maker as it hit a high of $100.75 before settling to close at $99/share. Apple (AAPL) this morning opened to an all-time high and continued to $155 before drifting down and closing slightly lower just under $153. The recently opened Amazon (AMZN) DRM-Free MP3 store is making its rounds and while there hasn't been much of an effect on Apple's stock yet the consensus has been that this can emerge as a true competitor to iTunes.

With the quarter coming to a close investors will be keen to be placed in the right companies as the earnings season kicks into high gear.

Disclosure: Author is long AAPL

Major Techs hit 52-Week Highs, Can the Rally Continue?

Post Fed Meeting, stocks have been on the upswing with new highs seemingly being made daily. While the market has rallied broadly, will we see a pause or can the ride continue? The Dow still sits about 200 points from its highs, Nasdaq 50 and the S&P about 30. In other words, there are still gains to be made towards the end of the year.

Technology has been on fire lately, as early earnings reports have been positive and multi-national companies are cashing in overseas as the US dollar weakens against other major currencies. Oracle (ORCL) had a great quarter and hit a 52 week high of $22.17 on Friday. It wasn't alone as many major tech players were just at or set new highs at the end of trading on Friday. Those companies included Google (GOOG) at $560, Ebay (EBAY) at $39, Cisco (CSCO) at $32, Amazon (AMZN) at $91, Research In Motion (RIMM) at $93, BIDU (BIDU) at $285.

So what's the trade for Monday and the rest of the year? Success will come to those companies that are getting a majority of their revenue in International currencies. Due to the US Dollar's record decline against the Euro, European business will drive profits this quarter and next. Big Tech is in good shape to continue to rally into the next round of earnings numbers due to and increasing dependence on Worldwide business for accelerated growth.

It's seemed lately that you can toss money into any tech stock and watch it rise, however, to truly pick a winner into the end of the year it's important to stand back and pick apart the business and the stock's valuation and determine which bet is best. It's vital to look at growth projections and current valuations to see that AMZN with a P/E in the 120s and a forward P/E of 51, is a much shakier bet than high growth GOOG or RIMM who sport forward P/E's in the 30 as the latter companies can seemingly growth into P/E's in the 40s and 50s. Steady Oracle and Cisco, who are experiencing revitalized business growth sport forward P/E's around 18, and a strong case can be made that these companies deserve P/E's in the 20s going into next year.

Technology has gotten its spark with the market rally over the last week and this sector will be a good one to be in come Christmas and the last calendar quarter of the year. Investors should take heed and come up with a criteria of which Technology companies should become the best investments. Here's a primer of things to look for when evaluating potential technology investments this holiday season.

1) Which companies will create, advertise, sell or re-sell the upcoming must-have gadgets or be involved in the back end of another record online-shopping season.

2) Determine which companies sport the largest percentage of International business.

3) Determine which companies have the ability to mold into their inflated P/E ratios so that any downside risk can be minimized with strong growth.

Disclosure: Author is long GOOG

Goldman Rules the Street again, Earnings top Expectations

Goldman Sachs (GS), the biggest of the Investment Banks, reported earnings on the heels of a Lehman Brothers (LEH) beat and a Morgan Stanley (MS) fall, and did it ever show who rules Wall Street. Goldman reported earnings of $6.13/share versus the average estimate of $4.35 and a high estimate of $5.08. Now that's an earnings beat!

Goldman was all over the headlines during the sub-prime meltdown for its flagship Alpha Fund and its negative performance, but the trading giant turned around those losses and made a killing betting against mortgages. The results, net income of $2.85Billion, a 79% increase, revenue of $12.3Billion, a 63% increase, and the undoubted respect of Wall Street.

Bear Stearns (BSC) did not fare as well, seeing earnings slide 61% year over year. Morgan Stanley saw declines also. Goldman showcased its ability to react to trouble and create investment opportunities out of volatility and panic, particularly in this quarter. Shares have been rising since lows around $170 and shot up to $210 as the numbers were announced. However profit taking and general market trends dragged Goldman back down to $203.

I previously wrote a couple things about Goldman Sachs with the latest being an August 9th article (Link) regarding the Alpha Fund losses. Within this piece I weighed the negatives and the potential positives, stating that in fact I think Goldman Sachs had found a bottom. Additionally, I outlined that this earnings number would be crucial in sending GS in the right direction and I ended by suggesting that "the plan that Goldman has in motion should lead it to calmer seas well ahead"

As for those losses. Goldman did book about $1.7Billion in credit losses but more than made up for that in other trading and underwriting business. In fact equity trading revenue more than doubled to $3.1Billion. In asset-management, even though a couple big funds lost more than 20%, Goldman was able to compensate by increasing management fees by up to 40%. When you can increase your fees by almost half when you're doing poorly, you've got what's called Business Clout! Something that simply can not be challenged by every other Investment Bank on the street.

It appears that Goldman has found these calmer seas even quicker than I would have anticipated and now I don't think that all time highs during the holiday run up are out of the question. A company this effective at profiting from market turmoil, slowdown fears and general economic panic, is something worth owning. At around $200 it may just be a very handsome Christmas steal also.

Disclosure: Author is long GS