Market Wrap-Up for Sept.21 (DRI, ORCL, AAPL, MCD, IP, more)

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We are a week or so away from the third quarter wrapping up and Wall Street was out with numerous upgrades this morning.

We'll get to some of those calls in a moment, but earnings results did fuel gains in names like Oracle ( ORCL ) and Darden Restaurants ( DRI ), although Oracle's report seemed fairly in-line. As for some of the upgrades, International Paper ( IP ) and Apple ( AAPL ) rallied early, but both names closed well off their earlier highs. McDonald's ( MCD ) shares were up following the company's latest dividend hike announcement. Once again, we did see the markets fade late in the session. The recent earnings warnings coming out of the transports sector - FedEx ( FDX ), Norfolk Southern ( NSC ), may have some investors a bit wary.

The Next Flash Crash

It's not a question of if another flash crash is coming, but just a matter of when. There has been no let up in "High Frequency Trading", in which trading firms/hedge funds set up technically-advanced programs to step in front of retail traders and their trades, all in an effort to make pennies on the trades over and over again. The thought process or defense of high frequency traders is that they are providing liquidity to the overall markets, until their system backfires and we see the net result.

I can't even imagine trading for a living these days, yet many get lured in by the focus and attention the business media pays to hedge fund tycoons that have made hundreds of millions from implementing high frequency trading strategies, among other techniques. Here's the thing, as systems evolve and strategies get even more advanced, there will undoubtedly be winners and losers. It's when the losers end up losing big and getting wiped out that the market's foundation gets shaken, leading to panic and eventually calls for hearings in Congress to find out what went wrong and how it can be prevented from happening again.

The result of the crash doesn't hurt longer-term investors such as dividend/income-seeking investors, as much as it could devastate those who had attempted to sit at the table with these algorithm scientists. The stories of life savings being lost in a trading day or two are numerous, but the lessons are always forgotten. Meanwhile, the financial engineers of whatever fiasco happens will plead ignorance to the results that were never expected to happen. You don't have to look far to see the little recourse the recent financial down-drafts have had. Leverage remains a key concern, yet no one bats an eye until things go terribly wrong.

It comes down to this, if one is positioned in the wrong part of the momentum trade at the wrong time, years of gains could disappear in the blink of an eye. For dividend investors, it could mean a great buying opportunity in some cases, but chances are, the pullbacks in the quality names won't last long as the run for safety trade tends to lead most back to how investing should be done.

For those who want to take their seat at the table with the big hedge fund players, be prepared for anything and everything. I can't say it enough!

A Look to Next Week and a Weekend Preview

Looking ahead to next week, third quarter earnings will continue to be very light, but we will get results from companies such as Nike ( NKE ), Walgreen Co. ( WAG ), and Accenture ( ACN ). The focus will also continue to be on the economic data as well as the latest Wall Street analyst calls.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Stocks

Referenced Stocks: AAPL , ACN , DRI , FDX , NSC

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