Markets Continue To Rally As The Dow Closes Above 17,000

Related BABA Jack Ma: SEC 'Misunderstood' Alibaba's IPO Alibaba Shares Break $100 On Apple Partnership Rumors Amazon Earnings: What to Expect (Fox Business)

U.S. stocks continued to charge forward as the Dow closed above the 17,000 mark as consumer confidence rose more than expected in October.

The Federal Reserve gathered Tuesday and will release a statement on Wednesday at 2:00 p.m. ET. It is not a foregone conclusion that the Federal Reserve will announce at that time the end its tapering activities.

The CBOE Volatility Index fell 8 percent to 14.76 as corporate earnings remain generally strong and Ebola related concerns appear to be dissipating, but still remain a closely watched topic.

Recommended: How Safe Are Low-Beta Stocks?

The Dow gained 1.12 percent, closing at 17,005.75. The S&P 500 gained 1.19 percent, closing at 1,985.05. The Nasdaq gained 1.75 percent, closing at 4,564.29. Gold lost 0.09 percent, trading at $1,228.20 an ounce. Oil gained 0.49 percent, trading at $81.40 a barrel. Silver gained 0.23 percent, trading at $17.20 an ounce. News Of Note

ICSC Retail Store Sales rose 2.8 percent year over year after rising 2.1 percent last week.

September Durable Goods fell 1.3 percent (versus expectations of a 0.5 percent gain) to $241.6 billion.

August S&P Case-Shiller Home Price Index rose 0.2 percent month over month (versus expectations of 0.5 percent) after rising 0.6 percent in July.

Redbook Chain Store Sales rose 4.4 percent year over year after rising 4.1 percent last week.

October Richmond Fed Manufacturing Survey rose to +20 (versus expectations of +10) from +14 in September.

October Consumer Confidence rose to 94.5 (versus expectations of 87.0) from 89.0 in September.

Analyst Upgrades And Downgrades Of Note

Analysts at Baird upgraded Buffalo Wild Wings (NASDAQ: BWLD) to Outperform from Neutral with a price target raised to $180 from a previous $160. Shares gained 13.35 percent, closing at $151.68.

Analysts at Wedbush initiated coverage of GoPro (NASDAQ: GPRO) with an Outperform rating and $81 price target. Shares gained 6.76 percent, closing at $69.30.

Analysts at JPMorgan maintained a Neutral rating on Kohl's (NYSE: KSS) with a price target lowered to $50 from a previous $55. Shares lost 6.64 percent, closing at $54.66.

Analysts at Baird downgraded Sarepta Therapeutics (NASDAQ: SRPT) to Neutral form Outperform with a price target lowered to $21 from a previous $53. Shares lost 4.97 percent, closing at $15.12.

Recommended: Apple To Benefit As China's 3G Subscribers Break Through The Half-Billion Mark

Analysts at Citigroup maintained a Buy rating on Treehouse Foods (NYSE: THS) with a price target raised to $100 from a previous $93. Shares gained 3.12 percent, closing at $83.50.

Analysts at Wedbush maintained a Neutral rating on Twitter (NYSE: TWTR) with a price target lowered to $40 from a previous $50. Analysts at Pivotal Research upgraded to Hold from Sell with a price target raised to $42 from a previous $38. Analysts at Nomura downgraded to Neutral from Buy with a price target lowered to $45 from a previous $55. Analysts at Citigroup maintained a Neutral rating with a price target lowered to $47 from a previous $53. Analysts at Canaccord Genuity maintained a Buy rating with a price target lowered to $56 from a previous $62. Shares lost 9.84 percent, closing at $43.78.

Analysts at JPMorgan maintained a Neutral rating on Under Armour (NYSE: UA) with a price target lowered to $60 from a previous $63. Shares lost 0.63 percent, closing at $64.30.

Equities-Specific News Of Note

Blackstone (NYSE: BX) plans to raise $13 billion for a new global real estate fund. Shares gained 0.53 percent, closing at $30.55.

Alibaba's (NYSE: BABA) CEO Jack Ma said he is willing to cooperate with Apple (NASDAQ: AAPL) on a mobile payment system. Shares of Alibaba hit new 52-week highs of $100.67 before closing the day at $99.68, while shares of Apple gained 1.51 percent, closing at $106.70.

Novartis (NYSE: NVS) said that its experimental heart failure drug LCZ696 will eventually generate $2 billion to $5 billion in sales. Shares gained 2.37 percent, closing at $92.35.

Regal Entertainment Group (NYSE: RGC) disclosed that it is exploring a potential sale of itself. Shares gained 3.75 percent, closing at $21.28.

IBM (NYSE: IBM) said it will add $5 billion to its current share buyback plan, bringing the total authorization to $6.4 billion. Shares gained 1.07 percent, closing at $163.60.

InterDigital (NASDAQ: IDCC) won a Delaware infringement suit against ZTE.

Related: InterDigital Traders Selling On News After Buying On Rumors

Winners Of Note

Tesla Motors' (NASDAQ: TSLA) CEO Elon Musk said that the company's September sales rose 65 percent year over year, contradicting reports from yesterday that indicated a slowdown in sales. Shares gained 9.45 percent, closing at $242.62, up 9.45 percent.

Madison Square Garden (NASDAQ: MSG) is considering splitting itself in to two companies; the first division will focus on sports and media, while the other will focus on real estate holdings. Shares hit new 52-week highs of $74.00 before closing the day at $73.00, up 10.98 percent.

Receptos (NASDAQ: RCPT) announced that its lead product candidate RPC1063 successfully achieved its primary endpoint in a Phase 2 clinical study, which evaluated safety and efficacy for the treatment of ulcerative colitis with a 1 mg dose. Shares surged to new 52-week highs of $102.60 before closing the day at $95.75, up 41.35 percent.

Decliners Of Note

Sanofi (NYSE: SNY) said that sales of its diabetes products will be flat next year due to heightened competition in the U.S. Shares lost 8.99 percent, closing at $48.07.

NQ Mobile (NYSE: NQ) rejected Bison Capital's buyout offer of $9.80 per share but remains in active discussions with the firm over other opportunities for investments and collaboration. Shares lost 15.43 percent, closing at $8.00.

Earnings Of Note

E.I. du Pont (NYSE: DD) reported its third quarter results this morning. The company earned $0.54 per share, beating the consensus estimate of $0.53. Revenue of $7.51 billion missed the consensus estimate of 7.95 billion. Shares gained 0.10 percent, closing at $67.95.

Novartis (NYSE: NVS) reported its third quarter results this morning. The company earned $1.37 per share, beating the consensus estimate of $1.29. Revenue of $14.70 billion beat the consensus estimate of $14.34 billion. Shares gained 2.37 percent, closing at $92.35.

Recommended: Street Leaned The Right Way Ahead Of Twitter's Earnings

Pfizer (NYSE: PFE) reported its third quarter results this morning. The company earned $0.57 per share, beating the consensus estimate of $0.55. Revenue of $12.36 billion beat the consensus estimate of $12.23 billion. Shares gained 0.21 percent, closing at $29.09.

Coach (NYSE: COH) reported its first quarter results. The company earned $0.53 per share, beating the consensus estimate of $0.46. Revenue of $1.04 billion beat the consensus estimate of $1.01 billion. Shares hit new 52-week lows of $33.25 before closing the day at $34.00, down 5.95 percent.

Freeport-McMoRan (NYSE: FCX) reported its third quarter results this morning. The company earned $0.64 per share, beating the consensus estimate of $0.62. Revenue of $5.70 billion was in line with the consensus estimate. Shares hit new 52-week lows of $28.64 before closing the day at $29.03, down 4.16 percent.

Facebook (NASDAQ: FB) reported its third quarter results after market close. The company earned $0.43 per share, beating the consensus estimate of $0.40. Revenue of $3.20 billion beat the consensus estimate of $3.11 billion. Shares were trading lower by 0.53 percent at $80.34 following the earnings release.

Quote Of The Day

“That's a range that the service industry and our customers can easily live within." - Halliburton CEO David Lesar on how the market will react to crude prices between $80 to $100 per barrel.

Posted-In: AerohiveEarnings News Econ #s Economics After-Hours Center Markets Movers Best of Benzinga

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  Related Articles (AAPL + BABA) Markets Continue To Rally As The Dow Closes Above 17,000 Jack Ma: SEC 'Misunderstood' Alibaba's IPO Apple, Aerohive Join Forces In ConnectED Wells Fargo Digs In To Apple's 10-K: iPhone 6 Gross Margins May Be Below iPhone 5 Apple To Benefit As China's 3G Subscribers Break Through The Half-Billion Mark Alibaba Shares Break $100 On Apple Partnership Rumors Around the Web, We're Loving...

Twitter Third Quarter Earnings Expected to Show More Volatility: Live Blog Recap

Live Blog Twitter Q3 Live Blog

NEW YORK (TheStreet) –– Twitter (TWTR) has had a rocky 2014 so far, with shares moving violently based on how many millions of monthly active users (MAUs) it adds in a quarter, and that's not going to end anytime soon as the San Francisco-based company reported third quarter earnings that missed consensus MAU adds. For the third quarter, Twitter earned an adjusted 1 cent a share on revenue of $361 million, up 114% year over year, however it added just 13 million MAUs, leaving it with 284 million at the end of the quarter. Analysts surveyed by Thomson Reuters expect the social network to earn an adjusted 1 cent a share on $351.35 million in revenue.   "We had another very strong financial quarter" said CEO Dick Costolo in the press release. "I'm confident in our ability to build the largest daily audience in the world, over time, by strengthening the core, reducing barriers to consumption and building new apps and services."   For the fourth quarter, Twitter's said it expects revenue to be between $440 million and $450 million, with Adjusted EBITDA between a range of $100 million to $105 million. The company also revised its outlook for 2014, saying it expects revenue to be between $1.365 billion and $1.375 billion, with adjusted EBITDA in the range of $260 million to $265 million.   Twitter shares closed the regular session lower, falling 2.8% to close at $48.56. In the late trading session after the close of the conference call, shares fell another 10.1% to $43.60.   -- Written by Chris Ciaccia in New York

>Contact by Email.

Follow @Chris_Ciaccia

The Butterfly Machine

There's a phenomenon called the Butterfly Effect.  One common quotation is "It has been said that something as small as the flutter of a butterfly's wing can ultimately cause a typhoon halfway around the world."

Today I am here to tell you that for that to be true, the entire world would have to be engineered to allow the butterfly to do that.  The original insight regarding how small changes to complex systems occurred as a result of changing a parameter by a little less than one ten-thousandth.  Well, the force of a butterfly and that of a large storm are different by a much larger margin, and the distances around the world contain many effects that dampen any action — even if the wind travels predominantly one direction for a time, there are often moments where it reverses.  For the butterfly flapping its wings to accomplish so much, the system/machine would have to be perfectly designed to amplify the force and transmit it across very long distances without interruption.

[Related -The Rectangle Range Continues for Apple (AAPL)]

I have three analogies for this: the first one is arrays of dominoes.  Many of us have seen large arrays of dominoes set up for a show, and it only takes a tiny effort of knocking down the first one to knock down the rest.  There is a big effect from a small initial action.  The only way that can happen, though, is if people spend a lot of time setting up an unstable system to amplify the initial action.  For anyone that has ever set up arrays of dominoes, you know that you have to leave out dominoes regularly while you are building, because accidents will happen, and you don't want the whole system to fall as a result.  At the end, you come back and fill in the missing pieces before showtime.

[Related -Buy These Solar Stocks Before They Snapback]

The second example is a forest fire.  Dry conditions and the buildup of lower level brush allow for a large fire to take place after some small action like a badly tended campfire, a cigarette, or a lightning strike starts the blaze.  In this case, it can be human inaction (not creating firebreaks), or action (fighting fires allows the dry brush to build up) that helps encourage the accidentally started fire to be a huge one, not merely a big one.

My last example is markets.  We have infrequently seen volatile markets where the destruction is huge.  A person with a modest knowledge of statistics will say something like, "We have just witnessed a 15-standard deviation event!"  Trouble is, the economic world is more volatile than a normal distribution because of one complicating factor: people.  Every now and then, we engineer crises that are astounding, where the beginning of the disaster seems disproportionate to the end.

There are many actors that take there places on stage for the biggest economic disasters.  Here is a partial list:

People need to pursue speculation-based and/or debt-based prosperity, and do it as a group.  Collectively, they need to take action such that the prices of the assets that they pursue rise significantly above the equilibrium levels that ordinary cash flow could prudently finance. Lenders have to be willing to make loans on inflated values, and ignore older limits on borrowing versus likely income. Regulators have to turn a blind eye to the weakened lending processes, which isn't hard to do, because who dares oppose a boom?  Politicians will play a role, and label prudent regulations as "business killers." Central bankers have to act like hyperactive forest rangers, providing liquidity for the most trivial of financial crises, thus allowing the dry tinder of bad debts to build up as bankers use cheap funding to make loans they never dreamed that they could. It helps if you have parties interested in perpetuating the situation, suggesting that the momentum is unstoppable, and that many people are fools to be passing up the "free money."  Don't you know that "Everybody ought to be rich?" [DM: then who will deliver the pizza?  Are you really rich if you can't get a pizza delivered?]  These parties can be salesmen, journalists, authors, etc. whipping up a frenzy of speculation.  They also help marginalize as "cranks" the wise critics who point out that the folly eventually will have to end.

Promises, promises.  And all too good to be true, but it all looks reasonable in the short run, so the game continues.  The speculation can take many forms: houses, speculative companies like dot-coms or railroads, even stocks themselves on sufficient margin debt.  And, dare I say it, it can even apply to old age security schemes, but we haven't seen the endgame for that one yet.

At the end, the disaster appears out of nowhere.  The weak link in the chain breaks — vendor financing, repo financing, a run on bank deposits, margin loans, subprime loans — that which was relied on for financing becomes recognized as a short-term obligation that must be met, and financing terms change dramatically, leading the entire system to recognize that many assets are overpriced, and many borrowers are inverted.

Congratulations, folks, we created a black swan.  A very different event appears than what many were counting on, and a bad self-reinforcing cycle ensues.  And, the proximate cause is unclear, though the causes were many in society pursuing an asset boom, and borrowing and speculating as if there is no tomorrow.  Every individual action might be justifiable, but the actions as a group lead to a crisis.

In closing, though I see some bad lending reappearing, and a variety of assets at modestly speculative prices, there is no obvious crisis facing us in the short-run, unless it stems from a foreign problem like Chinese banks.  That said, the pension promises made to those older in most developed countries are not sustainable.  That one will approach slowly, but it will eventually bite, and when it does, many will say, "No one could have predicted this disaster!"

You could soon use bitcoin to support political campaigns

A federal agency is poised to allow limited use of bitcoin for fundraising for political campaigns.

WASHINGTON (CNNMoney) Bitcoin enthusiasts may soon be able to use the digital currency to support political campaigns.

The Federal Election Commission will consider a request this Wednesday that could open the floodgates for donors to make political contributions in Bitcoin in the upcoming mid-term elections.

It's a sign of increased acceptance of the upstart currency, as more businesses and individuals are starting to embrace Bitcoin payments as an alternative to credit cards.

If the panel rules in favor, it would be a turnaround from last fall, when the election commission deadlocked on a similar request.

Sai, who runs the political group Make Your Own Laws, is hopeful the commission will approve it this time. (Sai is his legal name.) Make Your Own Laws, which filed the request, is a nonpartisan group - its website says its aim is to use technology to give individuals a louder voice in elections and democracy.

Since there's no law that currently prevents the use of Bitcoin in elections, a handful of candidates and political groups say they're already accepting Bitcoin.

Texas Attorney General Greg Abbott, who is running for governor in that state, said last week he'd accept donations in Bitcoin. The Libertarian Party also collects between $10,000 and $20,000 in bitcoin each year. It's a small percentage of the $1 million it raises annually, according to Libertarian Party Executive Director Wes Benedict.

"Libertarians are a little more interested in currencies than the average person out there, so we try to comply with requests to contribute in Bitcoin," said Benedict, whose group includes members who oppose government regulation, even on currency. "We're watching for ! an update to the ruling," he said.

These developments come as Bitcoin is under increased scrutiny. Earlier this month, Attorney General Eric Holder told lawmakers that virtual currencies pose a challenge for law enforcement agencies, because they can be used to hide illegal activity.

Bitcoin has grown in popularity in large part because Bitcoin transactions are anonymous.

That has led to its use on the black market like on Silk Road, the online site for marketing illegal drugs and other items, until the FBI shut it down last fall.

As Bitcoin comes of age, more government agencies are figuring out how to regulate it.

Since Bitcoin are traded, Sai says the virtual currency can be treated like an in-kind political contribution similar to contributions of stocks, bonds or gold pieces to a campaign.

  5 bad signs for Bitcoin

To ensure that Bitcoin contributions follow the election commission's guidelines of transparency in campaign contributions, Sai's group wants the donations to be clearly identified and capped at $100 per donor, per candidate.

Cheap Stocks Wall Street Loves: Halliburton Company

Halliburton  (NYSE: HAL  ) is a darling of Wall Street. Twenty-six of the 31 analysts currently covering the company rate it a buy or strong buy. Only one analyst thinks the company's stock will underperform. One reason reason Wall Street loves this stock is because it's so cheap. However, that's only part of the story, so let's drill down a bit deeper.

What makes Halliburton a cheap stock?
There are many different ways to value a stock, with a simple price-to-earnings ratio, or P/E, being a common foundation. Halliburton's P/E is 15, making it cheaper than its industry peers, which have an average P/E of 20.

  

Sources: Flickr user ThinkGeoEnergy. 

However, P/E only tells us the stock's valuation for its earnings over the past year. Those earnings could rise or fall in coming years, but we won't know that from this particular ratio.

That's why many investors take the P/E ratio one step further and take a look at the price/earnings-to-growth ratio, or PEG ratio. This simply divides a company's price/earnings ratio by its long-term growth rate. Here we are looking for a PEG ratio of less than 1x, which signifies investors are not overpaying for the company's growth. Halliburton's PEG ratio is 0.59, so it looks quite cheap by this metric, too. 

Why does Wall Street love Halliburton's stock?
Analysts expect Halliburton to steadily increase earnings over the next few years, from $3.99 per share this year, to $5.25 per share next year, and $6.21 per share in 2016. That strong growth is fueled by the shale boom in North America, as well as Halliburton's oilfield services offerings around the world.

Halliburton's strong suit is its offerings of products and services to shale producers. It helps producers overcome the challenges of these tight oil and gas plays by targeting wells to the sweet spots of the play, optimizing fracture treatments to get more oil and gas out of the rocks, and handling the process in an environmentally responsible manner. Halliburton is a leader when it comes to shale, and the company continues to roll out new products and services that help producers get more out of each well. 

Analysts also love the stock for the company's share repurchase program. The company has an excellent track record of buying back shares when its stock is cheap, which helps increase earnings per share. Earlier this summer, the company reloaded its stock buyback program to a total of $6 billion. That buyback authority will come in handy given the recent sell-off in the company's stock, as it can now buy a much bigger chunk of shares.

HAL data by YCharts.

As shown in the chart, Halliburton's stock today is as cheap as it was the last time the company bought back a large amount of shares. Analysts know Halliburton will likely repurchase a significant amount of stock in light of the recent sell-off, which is a pretty big catalyst that could move the stock higher once again.

Investor takeaway
In Halliburton we find a reasonably cheap stock that has two big catalysts in the form of earnings growth and a big stock buyback. That is why it's no surprise analysts love this stock. 

"As significant as the discovery of oil itself!"
Recent research by the U.S. Energy Information Administration has already tabbed this "Oil Boom 2.0" with a downright staggering current value of $5.8 trillion. The Motley Fool just completed a brand-new investigative report on this significant investment topic and a single, under-the-radar company that has its hands tightly wrapped around the driving force that has allowed this boom to take off in the first place. Simply click here for access.

Cliffs Natural Resources Gets an Upgrade as Iron Miners Get Pounded

What’s this? The iron miners including Rio Tinto (RIO), BHP Billiton (BHP) and Vale (VALE) are getting killed but here’s the generally bearish Gordon Johnson of Axiom Capital upgrading Cliffs Natural Resources (CLF) to Hold from Sell. The reason? Valuation. Johnson explains:

Reuters

While we certainly see further downside as possible, we see the risk/reward as balanced at today's share price/valuation level; given the stock fell -52% at its trough set 10/10/14 from our last update 7/23/14 (where we strongly recommended being short) and has corrected roughly -60% since our initiation of coverage when the shares were trading at ~$25/shr, we take this opportunity to move to the sidelines pending C3Q14 results

While we see further downside for iron ore prices as likely over the n-term, we expect increased volatility to define Cliff's shares n-term. That is, given our call, when iron ore was at $140/mt in '13 that it was headed to ~$80/mt in '15, has played out, & been subsequently "priced into" Cliffs's shares at today's prices, we view mgmt's decisions on nonfundamental issues driving the stock over the n-term (vs. fundamental factors). As such, w/ the shares at our 12-month price objective, & trading at a ~8x EV/EBITDA multiple based on our 2015 ests., we move our rating to HOLD from SELL.

No kidding about that further downside risk, as iron miners are getting completely wrecked today. While shares of Cliffs Natural Resources have fallen 6.3% to $8.50 at 1:32 p.m., Rio Tinto has dropped 3.5% to $49.01, BHP Billiton has declined 1.2% to $57.70 and Vale is off 4.3% at $11.29.

Alexander and the Terrible, Horrible, No Good, Very Bad Week for Stocks

Should we take it as an omen that this week sees the release of Alexander and the Terrible, Horrible, No Good, Very Bad Day what with the stock market getting pounded the way it has? And should we be surprised that Alexander and the Terrible, Horrible, No Good, Very Bad Day might not be a terrible, horrible, no good, very bad movie? Sure, it’s not getting unanimously good reviews, but 63% have been positive, enough to earn it a “Fresh” rating from RottenTomatoes.com. Bilge Ebiri of New York Magazine, for one, calls it a “minor miracle…It's funny, fast, and charming.” The Boston Globes‘ Tom Russo, meanwhile, says “the filmmakers come up with a modestly likable mix of zany and gently warmhearted.” With Box Office Mojo now redirecting to IMDB, we turn to MKM Partners’ Eric Handler, who notes that Alexander and the Terrible, Horrible, No Good, Very Bad Day should make about $18 million this weekend, enough for second place behind last week’s winner, Gone Girl.

The Walt Disney Company

With the pounding the market’s taken, I suspect investors will want to take in a movie just to forget this horrible week. The S&P 500 fell 3.1% to 1,906.13, the largest weekly drop since May 18, 2012, while the Dow Jones Industrial Average dropped 2.7% to 16,554.10. The Nasdaq Composite tumbled 4.5% to 4,276.24 and the small-company Russell 2000 slid 4.7% to 1,053.32.

Friday’s selling was particularly disturbing. Twice today the market sold off, only to battle back into the black. Then the selling really started to pick up, as the S&P 500 closed down 1.2%, the Russell 2000 finished off 1.4% and the Nasdaq Composite got hammered to the tune of 2.3%. Worse still, there was no catalyst for the selling, save for the meltdown in chip stocks after Microchip Technology (MCHP) warned of an industry slowdown.

But there’s a lot more going on out there, including fears of slower economic growth, Fed Rate hikes and the strong dollar, a subject I touched on last week in my Streetwise column. Citi Private Bank’s Steven Wieting and Shawn Snyder explain why a potential rate hike is causing so much consternation:

Long-term policy guidance from the U.S. Federal Reserve, designed to achieve added monetary accommodation and augment quantitative easing, is now absent…At any point since mid-2011, investors could say with good certainty that U.S. short-term rates would not be any higher than zero looking at least 12 months out. This helped suppress financial market volatility, and investors no longer have that certainty. Under such circumstances, corrections in asset prices – even if short-lived – may become more severe than recent experience.

BMO Capital Markets’ Brian Belski and Nicholas Roccanova think the market is overestimating the risks of a stronger dollar:

Over the past 15 years, the US dollar and stocks have exhibited a high degree of negative correlation. Unfortunately, this has led to a widely held opinion that strong US stock market performance requires a weak dollar. The view from a longer lens suggests a different story. For instance, year-over-year changes in the US dollar and S&P 500 have exhibited almost no correlation since 1974. In fact, when we examined different stages of the US dollar cycle since 1974, our work shows that the S&P 500 has been able to exhibit strong performance irrespective of the specific dollar-cycle stage.

True, US companies have become more dependent on revenue from foreign sources, and a stronger dollar certainly complicates the competitiveness of US products and services abroad. But even so, we still have found little connection between dollar strength and overall stock market weakness. In fact, it appears that current investor worries regarding dollar strength are warranted only in extreme circumstances.

Citigroup’s Tobias Levkovich is perplexed by the fact that investors think dollar strength will continue but that oil prices will bounce back, even as they expect the US economy to continue to grow He explains why:

Confusingly, clients expect the dollar to strengthen, but an oil price rebound is perceived by year-end 2015. Furthermore, most envision the first Fed rate hike in 2Q15 though a good number see it in 3Q15. The 10-year Treasury yield is broadly seen as ending next year in the 3.0-3.5% range with buy siders projecting nearly 7.0% EPS growth next year, in line with the Citi forecast. Thus, investment managers apparently buy into the sustained US economic recovery thesis.

Wells Capital’s James Paulsen thinks it’s time to buy European stocks, in part, because of the dollar’s recent strength:

Finally, the U.S. dollar has recently strengthened substantially relative to the euro. The euro-dollar exchange rate is now near the lower end of a range which has been in force for almost a decade. Consequently, U.S. investors can buy eurozone stocks today with a reasonable expectation returns could be boosted should the euro revive some in the next year.

Since the 2008 crisis, the best buying opportunities have occurred where fear dominates the pricing of assets (e.g., buying stocks in March 2009 against widespread fears of a run on the U.S. banking industry, buying the astronomical government yields available in Europe as most feared the eurozone was imminently coming apart, and betting against the U.S. going over the fiscal cliff). Therefore, despite a consensus of investors currently avoiding equities in the region, should investors consider take advantage of the contemporary panic and overweight Eurozone stocks?

It’s a thought.

MSFT Stock Would Move if Windows 10 Includes This One Change

Whatever the validity of Microsoft's grandiose claims for the next version of Windows, one major feature could have big implications for MSFT stock.

Microsoft unveiled Windows 10 on Tuesday at a special event in San Francisco.

"Windows 10 represents the first step in a whole new generation of Windows," gushed Terry Myerson, executive vice president of Microsoft's operating systems group. The new version will be such a massive leap over the current Windows 8, he explained, that Microsoft felt compelled to skip past Windows 9.

#symbols-c4ca4238a0b923820dcc509a6f75849b { width: 253px; font-family: Arial; font-size: 11px; color: #333333; } #symbols-c4ca4238a0b923820dcc509a6f75849b .header { float: left; font-family: Georgia; font-size: 14px; color: #456626; line-height: 14px; padding-left: 14px; font-weight: bold; } #symbols-c4ca4238a0b923820dcc509a6f75849b .date { float: right; padding-right: 32px; font-weight: bold; } #symbols-c4ca4238a0b923820dcc509a6f75849b .chart { font-family: Georgia; font-size: 12px; color: #456626; width: 253px; height: 135px; line-height: 135px; text-align: center; } #symbols-c4ca4238a0b923820dcc509a6f75849b ul { list-style: none; padding: 0; margin: 0; } #symbols-c4ca4238a0b923820dcc509a6f75849b li { padding: 0; margin: 0; } #symbols-c4ca4238a0b923820dcc509a6f75849b li:nth-child(odd) { background-color: #eeebe6; } #symbols-c4ca4238a0b923820dcc509a6f75849b .symbols-item .name { float: left; width: 100px; overflow: hidden; padding: 3px; } #symbols-c4ca4238a0b923820dcc509a6f75849b .symbols-item .price { float: left; width: 55px; overflow: hidden; padding: 3px; text-align: right; } #symbols-c4ca4238a0b923820dcc509a6f75849b .symbols-item .percent { float: left; width: 80px; overflow: hidden; padding: 3px; text-align: right; } #symbols-c4ca4238a0b923820dcc509a6f75849b .symbols-item.active { background-color: #456626; color: #ffffff; } #symbols-c4ca4238a0b923820dcc509a6f75849b .chart-container { width: 253px; height: 135px; padding: 0 0 5px 0; } #symbols-c4ca4238a0b923820dcc509a6f75849b .chart-container img { width: 253px; height: 135px; max-width: none; } .clear { clear: both; } Microsoft NASDAQ: MSFT Oct 03 loading chart... Price: 46.09 | Ch: 0.33 (0.7%)

Customers ultimately will decide whether Windows 10 is a flop like Windows 8 and Vista or an enduring success like Windows XP and Windows 7; the new version goes on sale sometime next year.

To be sure, consumer reaction will affect the sales of Windows 10, which will have a direct impact on Microsoft stock.

But many suspect that a possible change to the way the software is sold - something Microsoft declined to discuss on Tuesday - could have a much more lasting impact on MSFT stock...

MSFT's Windows 10 Catch

Microsoft is very likely to introduce a subscription pricing model when it officially launches Windows 10, fundamentally changing how customers purchase its flagship product.

Most people buy a copy Windows indirectly when they buy a new PC. The software is pre-installed, with the PC manufacturer having already paid the licensing fee to Microsoft. It's what's called a "perpetual license" - good for the life of the PC.

The only time such a customer would pay for Windows is if he bought a new version of Windows as an upgrade.

Under a subscription model, a copy of Windows would still be pre-installed on a new PC, but the customer would have to pay Microsoft a monthly or annual fee to keep it active.

The fee would be modest, with the possibility that certain advanced features would cost a little more.

That might sound like a rip-off at first, but it can benefit the customer as well as Microsoft...

How a Subscription Can Be Good for MSFT Stock - And You

The benefits to Microsoft are fairly obvious.

Switching Windows 10 customers to a subscription model provides the company with a steady, dependable revenue stream and erases the uncertainty that would surround a major version release in the past.

Vista and Windows 8 taught Microsoft the harsh lesson that customers will avoid a Windows upgrade that gets a bad reputation. That not only costs the company sales but adds to compatibility headaches as users cling to outdated versions.

Such behavior forces Microsoft to support aging Windows versions for years, which diverts software engineers away from new products and innovations. And once Microsoft stops supporting a version - which means no more regular security patches - customers still using it become vulnerable to malware.

That's what happened with Windows XP. Even today, 13 years and three major versions of Windows after its release - and five months after Microsoft ended support for it - Windows XP is running on more than one in four of the world's PCs.

With a subscription model, that doesn't happen. Customers, be they enterprise customers or individuals, get all product upgrades automatically as long as they remain current with their account.

That's good for Microsoft, of course, but benefits customers by providing a stream of new features, bug fixes, and improvements as well as ensuring they don't get left behind on an unsupported version.

Enterprise customers also get the benefit of being able to spread out the cost of the upgrades over time rather than having to come up with one large sum of money for each major upgrade.

That leaves us with the "Why now?" question.

MSFT Finally Stops Fighting Change

Under former CEO Steve Ballmer, Microsoft often appeared on the defensive, particularly with regard to its two cash cows, Windows and Office.

But since taking over in February, new CEO Satya Nadella has shown that he wants to embrace, rather than fight, the changes to how consumers buy and use technology.

That has meant doing things like making Office available for the iPad. And it has meant a willingness to experiment with how the company sells its products.

"In a world of ubiquitous computing we want Windows to be ubiquitous," Nadella said at the April earning conference call. "And that doesn't mean one price and one business model on all that."

Microsoft has already implemented a subscription pricing model for other products, chiefly Office 360 and other cloud-based offerings. Extending the subscription model to Windows would be the logical next step, particularly given the success it has had with Office 360.

In the past two quarters, Microsoft has reported dramatic increases in its Office 360 subscriber base - more than 1 million in the June quarter alone - which brought the total to 5.6 million users.

More impressive is that Office 360 subscriptions helped drive a 147% increase in commercial cloud revenue in the company's fiscal fourth quarter, to a $4.4 billion annual run rate.

Expect Microsoft to offer several pricing tiers for both consumers and business customers, similar to how it sells Windows now, but as subscriptions. The company may continue to offer a "permanent license" version as well, but incentives and pricing will be geared to push customers toward subscriptions.

That's what Microsoft has been doing with Office, and the strategy has succeeded even beyond the company's expectations.

The arrival of Windows 10 is the perfect opportunity for Microsoft to launch a subscription pricing model for Windows. If Nadella manages it properly, this move can generate the core of a subscriber base that will drive revenue - and MSFT stock - for years to come.

Follow me on Twitter @DavidGZeiler.

UP NEXT: As much as a subscription model would help Microsoft stock, the company has been creating a much broader foundation for success. Here's why the MSFT comeback has only just begun...

Related Articles:

PCWorld: Microsoft CEO Nadella to Wall Street: 'We want Windows to be ubiquitous'