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The man who would like to think that he is the most influential person in the world gave a speech last night. It seems as though no one from the financial world listened to it, but that’s not really the case. The fact is that the financial world has bigger fish to fry and whole the world pretty much now knows that Mr. Obama is not nearly as influential as he thinks he is. At the moment, European Central Bank President Mario Draghi seems to have much more influence.
The financial markets seem to have much more interest in the quantitative easing that the ECB is expected to implement tomorrow, a solid day from energy stocks, and, in the U.S. in particular, to a disappointing report from IBM.
Energy
Crude oil futures were up slightly, giving a boost to majors like Shell (LSE:RDSA), BP (LSE:BP.) and BG Group (LSE:BG.) This, in turn, gave a boost to FTSE, which grew for the fifth day in a row, reaching a six-week high. One strategist described the effect as “a relief rally” that has “prompted some people to build positions in energy stocks.” We should note that “relief” rhymes with “brief” and this is probably how long this rally will last, given the probability that OPEC still plans to keep the price of oil low.
IBM
IBM shares (NYSE:IBM) took a nosedive today, dropping to 151.07 from yesterday’s close of 156.95. When a blue chip company with nearly a billion shares outstanding loses $5.00 per share, that can put a drag on the leading indexes. In fact, both the S&P and the Dow were down early in the day, as the plunge of IBM’s share created an immediate impact. Here is a brief summary of the IBM report, using GAAP.
- Q4 2014
- Revenue down 12%
- Net income down 11%
- Pre-tax income flat
- Diluted EPS down 4%
- FY 2014
- Revenue down 6%
- Net income down 7%
- Pre-tax income down 1%
- Diluted EPS up 2%
The operative word seems to be “down.” Nonetheless, there were a few bright spots and they were all in increasingly important grow areas. Cloud computing revenue grew by 16%. Security revenue increased by 19%. Business analytics revenue rose by 7% and mobile revenue trebled.
ECB
A strategist at Wunderlich Securities put perspective on the markets this morning, saying that “The biggest concern that investors have … is what happens tomorrow with the ECB and the larger risk is of the ECB doing something that disappoints markets.” (emphasis mine)
We are at one of those proverbial crossroads where we must wait for someone else to choose which direction to take. In this case that someone else is the ECB. Generally speaking, the consensus has been that the ECB would begin an asset purchase plan of up to €50 billion or more. However, CNBC reported that Ewald Nowotny, a member of the ECB Governing Council, has suggested that investors curb their enthusiasm, hinting that the bank may not implement changes as dramatic as the Swiss and others of us have anticipated.
Obama’s State of the Union Address
Do you really care? I told you what he was going to say yesterday. He just took longer to say it.
