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DJIA futures today (Wednesday) forecasted a 44-point increase from the Dow close yesterday. On Tuesday, U.S. stock markets cratered as investors grew nervous about the timing of the Federal Reserve's pending interest rate increase. The DJIA fell 333 points on the day, while the Nasdaq fell another 85 points.
Investors will be keeping an eye on domestic crude inventories, reported by the Energy Information Administration this morning at 10:30 a.m. Analysts project a ninth straight jump in crude stocks in the United States, although the American Petroleum Institute reported an unexpected decline of 404,000 barrels in crude stocks for the week ending March 6. The news will affect crude oil prices today and the broader energy sector.
Investors will also want to keep an eye on China, which is seeing a slowdown in its mighty economy. Even though its data would be the envy of many other nations — industrial output is up 6.8% and retail sales rose 10.7% — the figures are much lower than analyst expectations. Such data will also affect energy prices and global equities.
Here are some of the pre-market movers in the stock market today – including your "Money Morning Tip of the Day" – that you'll want to keep a close watch on to make it a profitable Wednesday:
- Out the Door: Shares of Google Inc. (Nasdaq: GOOG, GOOGL) were mute this morning despite news that its CFO Patrick Pichette has announced his retirement. The company hopes to announce his replacement within the next six months. Pichette has been with the tech giant since 2008, and has been an important defendant of the firm's ambitious projects that include space exploration, driverless cars, and digital contact lenses. Pichette said he plans to spend more time with his family.
- Daily Deal: Shares of General Mills Inc. (NYSE: GIS) gained more than 0.7% after the company said yesterday it plans to hike its quarterly dividend by 7%. General Mills' new $0.44 dividend per share will be paid on May to shareholders who owned the stock as of April 10. Be sure to visit Money Morning for a breakdown of the latest news on dividend stocks.
- Upgrade: Shares of SanDisk Corp. (Nasdaq: SNDK) were on the move this morning, gaining 3.1%. The bump comes a day after Goldman Sachs (NYSE: GS) added the chip maker's stock to its "conviction buy" list. Goldman believes the firm maintains an attractive valuation level and likes its expanding gross margins.
- Fast Food Fail: Shares of Wendy's Co. (Nasdaq: WEN) slipped more than 2% this morning on news that it received an "underperform rating" from Credit Suisse Group AG (NYSE ADR: CS). On Tuesday, the Swiss bank began coverage of the fast-food company.
- Oil Prices Today: Crude oil prices were subdued this morning after a surprise drop in domestic inventories in the United States. This morning, the EIA will report inventories. Brent crude, priced in London, temporarily slipped below $56 per barrel this morning, before reversing for a 0.3% gain. Meanwhile, April 2015 futures for U.S. crude, priced at the NYMEX in New York City, were up 0.4% to $48.49 per barrel.
- Earnings Reports: Today's earnings reports include. Express Inc. (Nasdaq: EXPR), Krispy Kreme Doughnuts Inc. (NYSE: KKD), Vera Bradley Inc. (NYSE: VRA), The Men's Wearhouse Inc. (NYSE: MW), Ferrellgas Partners LP (NYSE: FGP), Shake Shack Inc. (Nasdaq: SHAK), Fuel Systems Solutions Inc. (Nasdaq: FSYS), and Rosetta Stone Inc. (NYSE: RST).
Full U.S. Economic Calendar March 11, 2015
- MBA Purchase Applications at 7 a.m.
- Quarterly Services Survey at 10 a.m.
- EIA Petroleum Status Report at 10:30 a.m.
- 10-Year Note Auction at 1 p.m.
- Treasury Budget at 2 p.m.
Money Morning Tip of the Day: Don't listen to pundits warning of a tech stock "bubble." Today's Nasdaq is nothing like it was during the dot-com era. Tech stocks will keep beating the broader market.
Today's tip comes from Money Morning Tech Expert Michael A. Robinson:
Last week the Nasdaq Composite Index crossed the 5,000 level for the first time in 15 years.
The bears say this is proof we're living through another tech-stock "bubble" – and that a collapse like the dot-com debacle of 2000 is close at hand.
But the gloom-and-doomers are wrong. There is simply no comparison between today's Nasdaq and the go-go years of the Roaring '90s.
First, let's compare the pace of tech investing then and now. Back in the dot-com era, it took the Nasdaq just 49 days to rise from 4,000 to 5,000, a climb of 25%.
This time around, it has taken nine times as long – or 455 days – to do the same thing. The Nasdaq closed at 4,017 on Nov. 26, 2013, and closed at 5,008 on March 2.
Second, despite a much larger economy and 15 years of inflation since then, tech stocks are substantially cheaper today than they were in the late '90s.
Price/earnings (P/E) ratios illustrate this. By that stock-value standard, tech stocks today are 81.7% cheaper than they were in the late '90s.
At the height of the dot-com rally, Nasdaq stocks traded at 175 times earnings. Today, that figure stands at 32 – making today's stocks five times cheaper than they were then.
Finally, when we take inflation into account, the Nasdaq is well below its previous high. In 2000 dollars, the index would have to hit 6,908 to have the same value as back then, for an additional rally of 38%.
The bottom line: Tech stocks are nowhere near overheated. There are still plenty of ways to profit.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.