Market Summary - 2/14/2012

Highlights

Another day, another Greece headline! I am personally starting to get sick of Greece having such an impact on market prices.  Troubling news on the day was that the Germans seem to be signaling that they wouldn't be all that upset if Greece defaulted and left the Eurozone.  This is apparent in the demands they are insisting as well as the harsh stance they are taking.  However, this evening, the Chinese said that they are going to invest heavily in the Euro and are supportive of a strong Eurozone.  I imagine this plea is due to the reliance upon the US and dollars.  China, wants to diversify its assets and they rely upon the Eurozone heavily for international trade. Part of the drama in the markets today was the rescheduling of the Greece meeting from tomorrow to a phone call and the official meeting has been postponed yet again until Friday.  There was rumor at the end of the day that the Greeks are going to sign a commitment to honor their austerity and the markets rallied.  As cynical as this sounds, what is signing a paper going to do for the Greeks?  Time will tell. 

US markets finished relatively unchanged on the day, but bonds rallied as the flight to safety measure kicked in and inflation expectations were kept at bay.  Retail sales numbers were released and they grew less than expected, but still showed growth of .4% and an even better .6% excluding autos.  Business inventories, a measure of the inventory in dollar amount held by manufacturers, came in at .4%, less than the .5% expected.  This bodes well for the economy moving forward as businesses are managing with very lean levels of inventory and will probably have to restock moving forward.  The last major data point released on the day were the import and export prices.  Import prices dropped .1% and export prices rose .2%, greater than the .1% expected.  However, these numbers are still very low and helped explain the rally in rates today as inflation expectations are being kept at bay.

Equities

Due to time constraints, I wanted to focus on one stock today.  Zynga reported $311.2 million in revenue but still managed to lose money on the quarter.  This represents a 59% increase YoY in revenue, tremendous growth.  Earnings, however, were a different story.  The company reported a net loss on the quarter of $1.22 / share.  Excluding stock based compensation, the company managed to earn $.05 a share.  More troubling is that this number represents a 24% decline in profits from 2010 even with the stock based compensation removed.  I fear this company could be on my short list within a year if they don't manage to turn profits around.  After hours quotes had the stock down 9% on the report but the stock moved back to even by the close.