The Daily Dose: Time for Reflection

 | Apr 29, 2014 | 9:00 AM EDT
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Today represents a weird day for the market. We are fully aware the Fed meeting has commenced, the April employment report looms large and M&A activity is seemingly poised to intensify before the FOMC concludes QE at year end (hmm, wonder why?).

To boot, a couple of earnings reports are set to be issued from mid-tier industrial names, while restaurant earnings announcement will remind us of percolating inflation.

Today is very much wait and see, which for me constitutes a period to straight creep (dig deep) on the future for some stocks.

Lululemon (LULU): Particularly weak action, ugly chart relative to the broader market's recent higher move. After listening to the earnings calls from Under Armour (UA) and VF Corp. (VFC), it became clearer that Lululemon's position as a premium-only athletic maker is numbered. I continue to believe that new competitive activity from the aforementioned companies, as well as Gap's (GPS) Athleta brand, will require Lululemon to introduce cheaper-priced lines that go on to dent demand for its premium offerings. The stock price of Lululemon is telling us this (that and 2Q 2014 to date has not begun on a super pleasant note).

RadioShack (RSH): The next shoe is about to drop on the company. The stock price says RadioShack may be losing confidence among its vendor base for holidays. Note that merchandise for holidays are bought six to seven months in advance, about now.

J.C. Penney (JCP): Trust me, still quaking in the ole boots regarding our firm's April 10 upgrade. Since then, the stock has logged two unusual positive sessions on strong volume on no outward sign of news. But VF Corp. did acknowledge last week that a recent test of Wrangler's at JC Penney was "very successful." Hmm.

Around the Horn

On Low Wages ...

Hard to argue with this, but let's consider why it's happening. It's the low-wage-focused companies such as McDonald's (MCD), Wal-Mart (WMT) and dollar stores actually seeking to expand aggressively. Big-time economic message there. They essentially see a future of a poorer United States among the millennial and retiring Baby Boomer class. Also, let's not forget the younger generation, sub-30 year olds, are growing up in the independent contractor economy. They are fine free-lancing and living a modest life, their values are way different than their parents (live more within their means, not striving to buy the boat and country club membership by age 35)

Why Wall Street Loves Hillary Clinton ...

One thing Wall Street sees in Hillary Clinton: the Bill Clinton economy where innovation drove the economy and stock prices higher. There is a sense she gets business better than any potential Republican, while also having the skills to smooth over renewed geopolitical tensions. They also like that she probably won't mess with Janet Yellen and the Fed board construction.

Companies and their Cash ...

Companies are creating no lasting wealth for the economy by how they are spending their large cash piles and that is straight-up sad (and reflective of still-skewed incentive compensation plans). The appetite to do a transformative deal is just not there because execs are afraid of being tossed out by an activist raid. 

Here is a curveball in terms of companies investing in their future. The restaurant sector is hot with reinvestment. Top names such as Starbucks (SBUX), Domino's (DPZ), Chipotle (CMG) and Papa John's (PZZA) are pouring money into new menu items, new restaurants and in mobile technology that bolsters their sales.

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