With QE2 Ending Will Headwinds Prevail? (FOSL, BID, ATVI, MSFT, MED, PAL)

Stocks had a strong day, bolstered by China reporting an $11.4 billion trade surplus on 30% export growth. The numbers show that China’s economy is still growing strongly despite government efforts to cool it down a bit. Commodities were volatile but generally had a good day with silver, gold, oil, and natural gas moving higher. Overall, we continue to like the market based on the current global economic recovery, but some headwinds remain, including the end of QE2 in June and inflationary pressures. As such, we’d look to take advantage of some market softness that we’re expecting to see this summer, ahead of what could be a solid close to the year.

The Fitness and Dieting Stocks Index was the top performing tickerspy Index on the day, led by Medifast (MED) with a 18% gain. The Platinum and Palladium Stocks Index was the day’s worst performing tickerspy Index, with North American Palladium (PAL) down -26%.

Stocks rose on the day, with the Dow up 76 points to 12,760. The S&P climbed 11 points to 1,357, while the Nasdaq advanced 29 points to 2,872. Oil jumped $1.37 to $103.88 a barrel, while gold rose $13.70 to $1,516.90 an ounce.

In economic news, wholesale inventories rose 1.1% in March, the 15th consecutive month of gains, the Commerce Department said. Wholesale inventories are now at their highest levels since November 2008.

In earnings news, shares of Fossil (FOSL), the apparel and accessories retailer, soared 12.7% after the company said its first-quarter earnings rose 55% to $55.8 million, or 86 cents per share, from $35.9 million, or 53 cents per share, a year earlier as revenue climbed 37% to almost $537 million. Analysts were expecting a profit of 66 cents a share on sales of $513.8 million. Texas-based Fossil forecast a second-quarter profit of 70-73 cents a share on revenue growth of 28%-30%. Analysts were expecting a profit of 76 cents. The company also forecast a full-year profit of $4.44-$4.54 a share on revenue growth of 21%-23%, up from previous guidance of $4.22-$4.32 a share on revenue growth of 19%-21%. Analysts were expecting a full-year profit of $4.35 a share. Fifteen pros held Fossil in their portfolios at the end of 2010 and nearly 130 tickerspy members own the stock in their portfolios.

Shares of auction house operator Sotheby’s (BID) plunged 6.1% after the company posted a first-quarter profit of $2.4 million, or 3 cents a share, compared with a loss of -$2.2 million, or -3 cents a share, a year earlier. Revenue jumped 17% to $119.6 million. The profit missed analysts’ estimate by a penny while revenue topped the $119 million consensus estimate.

Video game maker Activision Blizzard (ATVI) said its first-quarter profit surged 32% to $503 million, or 42 cents per share, from $381 million, or 30 cents per share, a year earlier. Revenue rose 11% to $1.45 billion. On an adjusted basis, Activision earned $156 million, or 13 cents a share. Adjusted revenue was $755 million. Analysts were expecting a profit of 8 cents on sales of $665 million. For the current quarter, Activision is forecasting an adjusted profit of 4 cents a share on adjusted revenue of $575 million. Analysts were expecting a profit of 8 cents on revenue of $684 million. The company raised its full-year profit and revenue guidance to 73 cents and $3.95 billion from 70 cents and $3.9 billion. Shares or Activision rose 0.7%.

Microsoft (MSFT), the world’s largest software company, agreed to purchase Internet telecom firm Skype for $8.5 billion, marking the largest purchase ever for Washington-based Microsoft. Luxembourg-based Skype lost -$7 million on revenue of $860 million last year. Microsoft said Skype will become a new business division headed by Skype CEO Tony Bates. Shares of Microsoft fell -0.6%. Nearly 700 pros held Microsoft in their portfolios at the end of 2010 and more than 4,200 tickerspy members own the stock in their portfolios.

Tags: ATVI, BID, FOSL, MED, MSFT, PAL