Investor caution could dominate mid-week trading as debates over the pending 'fiscal cliff' in the United States intensify as European leaders across the Atlantic decide to pay for another round of bailout financing to ward off a Greek bankruptcy. The Greek government ignored the molotov cocktails and angry protesters last week to come up with additional measures of austerity - the first step towards securing this additional round of bailout money - and European fiscal representatives granted the country another two years to get its fiscal act together, but concerns of how these bailouts will be paid for transparent to European taxpayers will still weigh heavily on the markets.
European shares suffered as a result on Tuesday, as did the Euro, which hit multi-month lows.
Any talk of European or international fiscal entities leaving the Greeks to fend for themselves is slim at this point, so the markets may take any concerns of a return to the drachma with a grain of salt, given that the bailout money has already started to flow into the country and it doesn't look like the tap is going to be shut off. That said, if the rest of Europe gets tired of bearing the brunt of Greece's woes and uncertainty again creeps into the markets, all bets may be off.
For now, however, most investor attention in the US will likely be paid to the looming fiscal cliff and the stark divide between Washington's politicians on how to get a deal done...and then there's also a fair share of scandal and drama hitting the wires by the minutes, for those that enjoy such sideshows.
In the meantime, here's a few updates for some stocks and stories that we've been keeping an eye on...
Home Depot (HD): This week is slated to be a retailer-heavy week for earnings report and Home Depot marked an early win with a report that beat the street. The win, according to numerous media outlets, could largely be attributed to a rebound in the housing market and - although not your typical "retailer" - could also speak towards the uptick in consumer confidence noted earlier this month before the elections. Sales and net earnings both increased from the same quarter of the previous year and beat both internal and external estimates. Shares were up by two percent during early trading on Tuesday and could set the tone for an optimistic week in the earnings department.
Retailers: Saks (SKS), on the other hand, reported earnings generally in-line with estimates, but guided lower for the remainder of the year citing Hurricane Sandy as a cause for concern. Revenue came in slightly below estimates, but not enough to disappoint to the levels of other major misses of the quarter. Michael Kors Holdings (KORS) and Dick's Sporting Goods (DKS) did modestly beat the street, however, reaffirming the potential positive trends in the retail sector leading into the holiday shopping season.
Gilead Sciences (GILD): Shares of Gilead were on the fly Monday and early Tuesday on strong volume after the company reported positive resutls for its hep C treatment, composed of a combination of drugs. According to the study results, the combination "rendered hepatitis C undetectable after four weeks after completing 12 weeks of therapy." The GILD price movement spiked shares to record levels and highlighted investor enthusiasm towards new treatments for Hep C being developed. Abbott Laboratories (ABT) is developing a similar treatment, but this round goes to Gilead. With a price spike like that in a bum market, GILD is a story to watch.
Microsoft Corporation (MSFT): Shares of Microsoft were trading lower during early trading on Tuesday after the surprise announcement that Steven Sinofsky, the potential heir to the CEO position, left the company on Monday evening. Little is known for the reason at this time, but nervous investors took to selling early on Tuesday. Microsoft has been making news as its new tablet has been gaining quick market share while Windows 8 hits the market, too. The Sinofsky departure will likely turn out to just be a hiccup, but it's a story to watch since investors don't like uncertainty.
Healthcare, Biotech, Pharmaceutical:
MRI Interventions (MRIC): As previously discussed, MRI Interventions has developed the ClearPoint and ClearTrace MRI-enhancing systems that provide medical professionals with real-time imagery during complicated procedures on the brain and heart, respectively. Through partnerships with Siemens AG (SI), Boston Scientific Corporation (BSX) and Brainlab, the company has managed to push this technology into numerous markets in the US and recently made a move into Europe, too.
A key development that investors have been concentrating on recently is the revenue that the company can generate from "disposable items" relating to the procedures involving the ClearPoint or ClearTrace units, in addition to the revenue generated by sales of the units themselves. As discussed during previous weeks, MRIC has been able to note impressive revenue gains in relation to those 'disposable items,' providing a notable avenue for growth moving forward.
In addition to that note, however, company officials have also emphasizedthe importance of transitioning into a new stage of growth, as noted in a recent interview. The new push for more robust growth will revolve around the boosting a minimally-manned sales force with additional personnel in order to expand the awareness and market penetration of the ClearPoint and ClearTrace technologies. In keeping with that strategy, the company announced this week the appointment of Robert C. Korn as the head of its new global sales and marketing efforts. Mr. Korn had previously served as Regional Sales Director for Medtronic Surgical Technologies and brings to MRI the experience and contacts necessary to validate the next stage of growth.
MRIC shares responded to the news with a nearly twenty percent price spike on Monday and erased the losses of last week's close. Investors will look to the next few quarters for evidence that the boosted sales force is bringing returns that could soften the blow of any future financing deals. Currently, MRIC is set with enough cash to last well into 2013, according to the terms of the latest stock offering.
Mr. Korn joins two other recent additions to the sales team, indicating that MRIC is backing up words with action - always something investors look for from a management team.
Explosive Trace Detection (ETD) / Global Defense:
Implant Sciences (IMSC): Implant received quite a bit of attention last week following its questionable move lower and quick rebound to close the week, but all investor attention is still being concentrated towards the ongoing TSA certification process that could open the doors for numerous government contracts in relation to airline and air cargo security. It should also be noted, however, that while awaiting the final TSA news, the company has demonstrated that there are multiple avenues from which the company could secure global revenue. Earlier this year the Quantum Sniffer technology was put to use in Cartagena, Colombia to provide security at the 'Summit of the Americas,' and then just months ago the technology was emphasized in other high-threat market, such as Nigeria.
This week additional evidence of the global need for Sniffer technology was on display.
On Monday Implant secured another defense contract in the Middle East, with the sale being made by a Bahrain-based contractor. This particular contractor has registered sales from multiple countries in the region, which should be noteworthy because although Syria and Libya are garnering all the attention from the media right now, consistent threats of here-and-there explosive attacks are becoming increasingly prevalent around the region. In fact, recent news reports have indicated that Bahrain has called up its national guard to assist the police in dealing with these threats, making Monday's announcement by a Bahrain-based company that much more notable.
Following that news, it was announced on Tuesday morning that another order was placed from an un-named Asian nation to bolster its secret service force. While TSA still remains the holy grail in the eyes of the investing community, the Quantum Sniffer technology continues to demonstrate its versatility around the globe. Still a hot story to watch right now, considering that the TSA approval should be considered as much a milestone to this company as a drug approval by the FDA for a still-developing small pharma or biotech.
Roundup: The Greece situation looks to be somewhat settled for the time being, so it's back to worrying about the economic impact that a fiscal cliff would have on the US economy. As discussed this weekend, it's more likely than not that a deal will be reached, in my opinion, if only because each side will want to claim some sort of victory, but things could get ugly in the meantime. As usual, look for volatility to dominate trading for the remainder of the year.
Shares were trading relatively flat Tuesday morning.
Disclosure: Long IMSC.
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