McDonald’s (MCD) continues to display tremendous momentum from remodeling restaurants, improving food quality, adding new menu items, and expanding store hours. While many companies are slowing sharply in Europe, McDonald’s showed acceleration from October trends to November. The world isn’t so bad, despite Europe’s crisis, that business anywhere and everywhere is falling off a cliff. It isn’t as bad in Europe as it was in the US during Q4 2008.
The economic surprise index represents how macroeconomic indicators are reported relative to Wall Street economist consensus estimates. There was a big move down in April and May as estimates on the economic outlook were too high. Just the reverse has taken place since the summer. Economic forecasters have been too gloomy on the economy from August – November. Economic indicators are continuing to beat at present.
Parker Hannifin is one of the world’s leading diversified industrial companies. Parker Hannifin (PH) has large businesses in motion control, aerospace, fluid power systems, electromechanical controls, air conditioning, industrial refrigeration and thermal products. Parker reported record third quarter earnings which grew about 20% vs. a year ago. Organic sales growth was +10% which contained 3% from FX and 1% from acquisitions. Parker Hannifin not only had strong sales but grew operating margins to new records of 16.1% with particular strength in the American industrial segment and aerospace.
Parker Hannifin raised earnings guidance from a range of $6.70-$7.50 last quarter up to a new range of $7.25-$7.85 after today’s release. This is above the Wall Street consensus which was still sub $7 going into today. Guidance was raised by 6.3% and is significantly above wall street estimates ($6.96) so this has led to a 3% rally in the shares despite some strength heading into the quarter and a tough tape.
The conference call has just started. I will listen and post some quick thoughts a little later today.
This is a potential sign for a change in sentiment. If investors start to react to the real economic data again, which has been much better than what has been feared, small caps stand to benefit the most from valuation re-rating as many less liquid stocks have been demolished as of three days ago. Short squeezes are more likely in this area as well – the ax swings both ways with less liquidity.
The next segment to focus on is EM which has also been crushed. Both EM and small cap rallying would be strong confirmation of the rally. Watch the H-Shares overnight.
DOW up 152
S&P up 25 (2.2%)
Russell up 6.5%
XRT up 5.4%
Berkshire up 4.3%
The 200-day moving average for silver broke at $36. Since this break the metal has continued selling off sharply without support. Technical analysis is especially useful for currency and commodity markets where the idea of intrinsic value is less clear. Silver was in a long standing bull market but is now simply a market looking for support.
The 200-day in gold is: 1,528.
This level should be watched carefully.
