Stocks Stuck in Neutral After Hitting All-Time Highs

Stock markets are stuck in neutral today after ending last week at an all-time record close. As of 3:15 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down a negligible three points, while the S&P 500 (SNPINDEX: ^GSPC  ) is up a fraction of a point.

Among Dow stocks, shares of Cisco (NASDAQ: CSCO  ) have made one of the biggest moves, dropping 1.3%. The company reported strong earnings last week, but the stock may have gotten ahead of fundamentals as investors got excited about an earnings beat in the network space. Today an analyst at R. W. Baird downgraded Cisco's FlexPod partner NetApp to neutral and said Cisco was unlikely to buy the firm. This news doesn't justify a big drop in the stock, but after the stock's run-up last week, a slight pullback comes as no surprise. 

Consumer staple company Procter & Gamble (NYSE: PG  ) is another big loser on the Dow today, falling 1.2%. The company filed a patent infringement lawsuit against CAO Group in an Ohio court today, alleging the infringement of a number of dental products. The suit centers on CAO products that compete with Crest Whitestrips, which marked P&G as an innovator in a new market. Such actions are common in areas protected heavily by intellectual property, and P&G is just trying to protect a prized business, so there's no need to panic today. 

Merck (NYSE: MRK  ) rounds out the three Dow stocks losing big-time today, falling 1.9% to lead the index lower. The FDA released a review of the company's new sleep aid, finding it to be effective but noting some troubling side effects. Daytime drowsiness, suicidal thinking, and driving issues were cited in the report -- not side effects that Merck and its investors are happy about. The FDA will ask a panel of experts to vote on the safety and effectiveness of the drug, and it appears that higher dosing levels will be on the chopping block first. 

Can Merck beat the patent cliff?
This titan of the pharmaceutical industry stumbled into 2013 and continues to battle patent expirations and pipeline problems. Is Merck still a solid dividend play, or should investors be looking elsewhere? In a new premium research report on Merck, the Fool tackles all of the company's moving parts, its major market opportunities, and reasons both to buy and to sell. To find out more, click here to claim your copy today.

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More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

The Bull Market Is Igniting These Issues

Last week left stocks perched on another record high; they're off that high this morning, with the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) down 0.16% and 0.21%, respectively, at 10:15 a.m. EDT.

To market we will go!
The stock market's strong performance this year -- the S&P 500 has gained 14.5% through Friday -- has ignited a specific segment of the equity market: initial public offerings, or IPOs, in which companies sell shares to public market investors for the first time. It's a matter of simple economics; as stock prices (and valuations) increase, so, too, does supply. According to figures from Dealogic cited in The Wall Street Journal, 64 U.S. listings have raised $16.8 billion so far this year, substantially above the $13.1 billion raised during the same period last year.

What are individual investors to make of this phenomenon? I'm not a huge fan of Jim Cramer -- I find his hyperkinetic presentation style grating, and, although he preaches a fundamentally oriented investing style, his rapid-fire recommendations -- and reversals -- aren't consistent with that line. With that said, I think he got it mostly right when he made the following comments on IPOs last Friday:

If you nail it, if you get in on the right [IPO], you can have gains of 20%, 30%, even 100% in a day. The immediate nature of these profits makes them incredibly attractive. The potential of big gains can easily get in the way of your better judgment. ... Whatever you do, don't buy the new IPO right after it has started trading. I've got staggering statistics that show you are almost a sure loser if you buy a hot stock in the market right after it IPOs.

If you ever feel like you have to own the newly listed shares of a company, you're almost certainly making a mistake. Just like any other stock, the investment decision with regard to an IPO comes down to a comparison of market price with intrinsic value. When you combine a sky-high valuation with huge uncertainty regarding intrinsic value -- think Facebook, for example -- the potential for losses is high.

Instead of massively hyped technology IPOs, investors are often better off looking at boring businesses with dependable growth prospects. Two of those are in the current IPO pipeline: HD Supply Holdings, an industrial distributor, and Votorantim Cimentos, a Brazilian cement company, which has filed plans to raise $5.4 billion in the U.S.

If you're ready to invest based on fundamentals and long-term value creation, The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Are Mortgage REITs About to Drown in a Prepayment Tsunami?

Last summer, Federal Housing Finance Agency chief Edward DeMarco made a fatal mistake: He flatly refused to consider principal reduction on underwater mortgage loans backed by Fannie Mae and Freddie Mac. Perhaps DeMarco thought an Obama reelection wasn't in the cards, or maybe he really was concerned about the use of public funds toward such an endeavor. At any rate, rumors of his ouster were prescient, as President Obama has just nominated a replacement, Representative Mel Watt, a Democrat from Charlotte, North Carolina.

Mortgage REITs begin their plunge
It didn't take long for investors to show their concern, and by mid-afternoon yesterday, Annaly Capital (NYSE: NLY  ) and fellow agency players American Capital Agency (NASDAQ: AGNC  ) and Armour Residential (NYSE: ARR  ) had dropped sharply after the opening bell. By the market's close, each fell by 0.69%, 0.87%, and 1.23%, sequentially.

Investors may feel that Watt will be much more open to the principal-reduction scenario -- which would unleash a rash of prepayments possibly never seen before, as owners of troubled home loans not previously eligible to do so rush to refinance under more amenable terms.

Are they right? Could be. Watt has a history of consumer-protection leanings, having co-sponsored the Credit Card Accountability, Responsibility and Disclosure Act of 2009, in addition to advocating for the revamping of mortgage lending procedures. Despite these activities, he hasn't alienated Wall Street, and has been a recipient of healthy campaign contributions from both banks and insurers, according to The Wall Street Journal. 

Not a shoo-in
Watt faces a tough nomination process, however. Obama's previous effort to replace DeMarco ended in failure two years ago, when Republican hostility caused that candidate to withdraw. Watt's left-of-center views, including his support of making home loans more available to low-income and minority borrowers, will likely not endear him to the political right. Senator Bob Corker, R-Tennessee, has already been quite vocal in his dismay regarding Obama's plan to nominate Watt, labeling the choice as "political" and comparable to "the fox...guarding the hen house."

Despite these roadblocks, the Obama administration will certainly be better positioned to fend off opposition this time around, and Watt's nomination has already gotten the thumbs-up from several influential politicians, including Erskine Bowles and Alan Simpson, co-chairs of Obama's Deficit Commission. 

If Watt emerges victorious, mREITs will be in a more precarious position than they were last November, when banks were inundated with refinance work, and were therefore unlikely to take on more even if it came their way. With the mortgage business drying up, though, this threat looms larger than ever.

Still, the agency would need changes to its charter to pave the way for principal forgiveness for loans backed by Fannie and Freddie, and that surely wouldn't happen overnight, giving the industry time to come up with options. The mREIT sector managed to survive quantitative easing, after all. For Annaly and the others, a change at the FHFA may very well turn out to be just another surmountable obstruction on the well-traveled road to double-digit yields.

There's no question Annaly Capital's double-digit dividend is eye-catching. But can investors count on that payout sticking around? With the Federal Reserve keeping interest rates at historically low levels, Annaly has had to scramble to defend its bottom line. In The Motley Fool's premium research report on Annaly, senior analysts Ilan Moscovitz and Matt Koppenheffer uncover the key challenges the company faces and divulge three reasons investors may consider buying it. Simply click here now to claim your copy today!

Editor's note: A previous version of this article stated that NLY, AGNC, and ARR dropped 90% from the opening bell. The Fool regrets the error.

Littelfuse Buying Hamlin Inc. for $145 Million

Littelfuse (NASDAQ: LFUS  ) has signed an agreement to acquire Key Safety Systems' Hamlin subsidiary for $145 million in cash, Littelfuse announced Monday.

The deal will add Hamlin's portfolio of sensors for the automotive industry to Littelfuse's holdings, which Littelfuse CEO Gordon Hunter called "a major step forward in our strategy to build a global, automotive sensor platform." Hamlin also makes sensors for the electronics and industrial markets.

Hamlin is headquartered in Wisconsin with manufacturing, engineering, and sales offices in the U.S., Mexico, Europe, and Asia. Hamlin had sales of approximately $76 million in 2012.

Littelfuse expects the acquisition to help it achieve double-digit sales growth going forward, and to add $0.35 per share in profit in 2014.

The $145 million Littelfuse is paying for Hamlin works out to a 1.9-times-sales valuation on the deal, a slight discount to the 2.2 price-to-sales valuation Littelfuse's own shares currently command.

The transaction, which is subject to antitrust oversight and other closing conditions, is expected to close by the end of May.

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Ex-KPMG Partner Hit With Civil, Criminal Charges

NEW YORK (AP) -- The accountant and the jeweler were longtime friends and golf partners. But the accountant was passing private information about two companies to the jeweler, who used it to play the stock market. Now they're both under federal investigation, their reputations unraveling on a very public stage.

Federal prosecutors and the Securities and Exchange Commission on Thursday filed criminal and civil charges against fired KPMG partner Scott London for conspiracy to commit securities fraud through insider trading. The 24-page affidavit filed in support of the criminal complaint alleges that London, 50, of Agoura Hills, Calif., provided confidential information about KPMG clients Herbalife (NYSE: HLF  ) , Skechers USA (NYSE: SKX  ) , Deckers Outdoor (NASDAQ: DECK  ) , RSC Holdings, and Pacific Capital to Bryan Shaw, a close friend, from late 2010 until last month. Prosecutors allege that Shaw made more than $1.2 million in illicit profits by trading in advance of company announcements on earnings results or mergers.

The government alleges that on some occasions, London called Shaw two to three days before press releases were issued for KPMG clients and read confidential information from the draft releases to Shaw. London, who worked for KPMG for nearly 30 years, also disclosed confidential information about impending mergers concerning KPMG clients before that information was made public, and discussed how to structure Shaw's purchases of the stock in certain companies in order to protect them from being discovered, according to the complaint.

Shaw passed London "tens of thousands of dollars in cash" in bags over the years for the information, according to the government. London also received a $12,000 Rolex watch, as well as jewelry for his wife and concert tickets. London's lawyer Harland Braun has said London received "about $25,000" over several years. The SEC puts the cash sum at at least $50,000.

The scandal has unfolded in pieces this week. Late Monday KPMG announced it fired a Los Angeles partner who leaked nonpublic information about companies that KPMG worked with. On Tuesday nutritional supplement maker Herbalife and shoe seller Skechers announced that they were the companies whose information was leaked. On Wednesday, London publicly identified himself through his lawyer and issued a statement saying that he deeply regretted his actions and was just trying to help a friend struggling after his family run jewelry business began faltering in the economic downturn.

Thursday brought one of the remaining pieces of the puzzle when Bryan Shaw identified himself as that friend. The two men had met at a country club several years earlier and became close friends and golfing partners.

In a statement through his lawyer, Nathan Hochman, Shaw said he received information from London "about a number of companies" from 2010 to 2012. He said he had "profited substantially" from trading stocks based on that information, but he didn't provide details.

"I cannot begin to apologize for my incredibly stupid actions," said Shaw. "There is no excuse for my wrongful conduct. I accept full and complete responsibility for what I have done and know that I will spend the rest of my life trying to make up for my tragic lapses of judgment."

Hochman said Thursday that Shaw received a government subpoena several months ago and has been cooperating with the investigation. "As part of that cooperation, he agreed to make monitored phone calls with Mr. London, and have monitored meetings with him as well," Hochman said in an emailed statement.

London has said that he never leaked any documents. He described the interactions as his friend asking whether a stock was a good buy and London offering suggestions. He is expected to make his first court appearance later Thursday in Los Angeles.

The SEC is seeking unspecified penalties and restitution against London and Shaw. The federal charge of conspiracy to commit securities fraud through insider trading against London carries a maximum penalty of 5 years in prison, and a fine of at least $250,000.

S&P 500 Gains for Third Day, Posts Largest Three-Day Rally Since April

Stocks picked up where they left off on Friday, as investors continued to put growth fears behind them.

BRENDAN MCDERMID

The S&P 500 gained 0.9% to 1,904.04 today. That’s put it up the benchmark index up 2.2% during the past three days, its biggest three-day rise since mid-April.  The Dow Jones Industrial Average, meanwhile, ticked up 0.1% to 16,399.67 (click here to find out why it underperformed), the Nasdaq Composite rose 1.4% to 4,316.07 and the small-company Russell 2000 rose advanced 1.2% to 1,094.97.

Looking for a reason why the investors have set aside their doom & gloom in favor of a sunnier outlook? Beats me. Bloomberg cites better earnings, though earnings weren’t particularly bad last week, prompting Gluskin Sheff’s David Rosenberg to quip: “How bad can things possibly be when a bellwether like General Electric (GE), which has its tentacles spread to every facet of the economy, not only smashes through its profit targets, but raises its Q4 guidance and a $250 billion order backlog.” Paul Quinsee, head of US equity at JPMorgan Asset Management agrees with that sentiment. “The the numbers we were counting on coming in very strongly have come in strongly,” he said in a phone interview today. “Forward statements have been reasonably good so far too.”

Maybe it just took a little while for that to sink in. Whatever the reason, Deutsche Bank’s David Bianco and team note that markets often bounce back quickly once it becomes clear that the world isn’t going to end:

At 1850-1900, we think the S&P is priced for flat to slightly lower earnings in 2015 (EPS of $115-118). If oil prices stabilize and incoming data suggests no recession, as we expect, confidence should improve in our arguably conservative 2015E EPS of $123. This should make the S&P return to the highs of the year by year end. In the past, when a profit recession was avoided, S&P rallied quickly fully recovering the loss within 2 months.

Then there’s the fact that buybacks have been conspicuously absent as the market cratered thanks to the fact that companies are busy reporting earnings. Goldman Sachs strategist David Kostin thinks a pickup in share repurchases could push the S&P 500 up to 2,50 by year end:

Most companies are precluded from engaging in open-market stock repurchases during the five weeks before releasing earnings. For many firms, the beginning of the blackout period coincided with the S&P 500 peak on September 18. So the sell-off occurred during a time when the single largest source of equity demand was absent. Buybacks dip during earnings reporting months, which have seen 1.2 points higher realized volatility than in other months during the past 25 years. In terms of timing, more than 75% of S&P 500 constituents will have reported 3Q results by the end of October and will then be able to resume buybacks. We expect companies will actively repurchase shares in November and December. Since 2007, an average of 25% of annual buybacks has occurred during the last two months of the year.

Barclays’ Jonathan Glionna and Eric Slover also see buybacks adding to demand:

With prices falling, corporations may emerge as a powerful source of demand. We estimate that S&P 500 companies spent $400bn repurchasing shares in the first nine months of 2014. Another $130bn could be spent in the fourth quarter, by our calculations. To put this in context, the market capitalization of the S&P 500 is $16.5tn. The key consideration is that companies are often in blackout periods during the first few weeks of October as they await the publication of financial results. While many utilize 10b5-1 plans that allow repurchases to continue during blackouts, the ability to opportunistically take advantage of lower prices is impeded. Once results are released, corporations have more flexibility. Of the twenty companies that buy back the most stock, 14 will have reported earnings by the end of October, clearing the way for some of the market’s most consistent buyers to increase their volume.

Glionna and Slover, however, see the S&P 500 closing the year at “only” 1,975. After the recent volatility, I’ll take it.

Why Investors Should Buy Qihoo

Qihoo 360 Technology (QIHU) is making an impressive mark in the Chinese Internet market. The company has been reporting rapid growth in its top and bottom lines. Given the size and the growth rate of the Chinese Internet industry, it is highly likely that Qihoo will continue outperforming going forward. Let's take a look at Qihoo's recent results and see why it could outperform in the long run.

Terrific growth

Qihoo, in the fourth quarter of fiscal 2013, reported total revenue of $265 million, up 19.6% sequentially and 141.3% year-over-year. Revenue beat the company's expected range of $117.8 to $228 million. The company posted EPS of $0.40, beating the consensus estimate of $0.34.

The gross margin was 81% in the quarter, compared to 87.3% last year, while the operating expense was $155.2 million, almost double of last year. However, Qihoo is investing aggressively in the business, which is the reason behind this huge jump in the expenses. But, these investments will place it in a good position for the long run. Moreover, the company's outlook is strong. For the first quarter of fiscal 2014, the expected revenue is between $300 million and $305 million, a year-over-year increase of 98% to 101%. Looking ahead, Qihoo should be able to continue its terrific growth due to the moves that it is making.

Impressive strategies to drive growth

Qihoo's year-over-year growth is credited to its online advertising and Internet value-added services, with IVAS continuing to deliver outstanding performance. Both search and mobile monetization showed robust growth during the quarter. It delivered an increase in the mobile gaming sector, driven by a jump in paying game accounts.

The strong search monetization and the expansion of performance-based advertising on Personal Start-up Page have played a key role in the performance of the company. The year-over-year increase in revenue was driven by increased marketing expense, bandwidth cost, depreciation, and personnel related costs as the company expands its sales and marketing efforts to support search monetization and mobile Internet penetration. Simultaneously, it is strengthening its technology and product development capabilities.

Qihoo has bolstered its position as the leader in the Chinese Internet market, with its PC security products covering 95% of Chinese PC Internet users. Its active users have reached 475 million, and smartphone security solutions are covering 70% of Chinese smartphone users.

Intent on capturing more market

By the end of the previous quarter, Qihoo had approximately 1,000 games running commercially on its game platform, while the total number of games grew to approximately 1 million as compared to 700,000 in the prior quarter. Qihoo's game platform continues to attract game developers and gamers. The company's Android app store, 360 Mobile Assistant, attracted a huge number of users rapidly, and continues to lead the market.

Qihoo looks forward to making investments in product development and technology innovation, which have been playing key roles in its success. This will expand its coverage of PC and mobile Internet globally.

Qihoo is also looking to boost its market share in the algorithmic search market in China by making use of the search habits of the users. As of now, Qihoo holds a market share of 25% in search queries, which accounts for only 3% of its revenue. However, analysts expect Qihoo's market share to rise to 35% in 2016, and due to better monetization, revenue from this segment will reach at least 15% of total revenue.

Analyst

Wealthy Families Search for New Meaning of Wealth

Wealthy families around the globe are exploring how to use their private capital to positively influence the social and economic challenges they see around them, according to new research by the global law firm Withers Bergman.

The findings show that families are moving beyond an objective of wealth preservation alone, and finding new purposes for their wealth that can give meaning to wealth ownership for each new generation.

Withers, working with wealth research agency Scorpio Partnership, based its research on 16 in-depth interviews with multimillionaires and billionaires from the U.S., Asia and Europe, and cross-referenced their opinions and experiences against the attitudes of 4,500 individuals with more than $10 million in personal wealth, who had answered digital surveys on a wide range of subjects over the past two years.

“Families are finding that active participation is much more beneficial for the family and for society than a passive approach to investing or giving,” Withers Bergman partner Justin Zamparelli said in a statement.

Although the interviews showed that the desire to give wealth a purpose existed across cultures and generations, this was currently most evident and active in the U.S.

“There is a clear trend showing that several generations of relative economic and political stability have given North American wealth owners the longest experience of transitioning wealth from operational businesses to financial family structures, and then back into the wider economy and society,” Withers Bergman partner David Guin said in the statement.  

Researchers asked wealth holders what lessons they had learned that they would wish to share with other global families.

Five key lessons emerged that respondents said they had learned through coping with succession and working to preserve their assets and family unity.

Transitions are complicated, whether selling a business, setting up a foundation or passing control of wealth to the next generation.

Families should ask themselves “why are we doing this?” at each transitional stage to find the common objectives that keep them, and the family’s wealth, intact.

Take your time. Family businesses are a collection of individuals, not an organization. They require a unique leadership style that should involve listening, learning, observing, sharing and understanding.

Lead with principle. Wealth ownership means that attention is focused on family business heads. They should lead by example. When wealth is used as a force for positive social change, the wider community will view its ownership with greater respect. 

Recognize your limits. A family business comprises many roles; no single person can play them all well. Once the skills, strengths and motivations of every family member (including the head’s) have been accurately assessed, other family members and professional advisors can be appointed to fill the gaps.

Give the next generation just enough. Each generation should be able to think of itself as the first generation. For the next generation, this means they should be given everything they need to be successful, but no more. For the older generations, it means recognizing when to step aside. 

“Maintaining commonly held reasons for working together as a family is a continual process,” Catherine Tillotson, managing partner at Scorpio Partnership, said in the statement.

“When a new generation is called upon to take ownership of the family wealth, there is a potential for it to unravel, as the younger family members bring their own values and interests to bear. Clearly, anything that creates coherence and harmony is valuable, and these days it appears to be the social application of wealth.”

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Related on ThinkAdvisor:

The Birth, Growth, Maturity and Death of the Current Bull Market

NEW YORK (TheStreet) -- As Sir John Templeton once said, bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.

We are getting to the eurphoric stage.

The four major stock indexes finished in the green on Tuesday, ahead of the Federal Reserve Open Market Committee announcement on Wednesday.

The DJIA finished higher by 27.48 points at 16808.49 while the S&P 500 was up 4.21 to close at 1941.99. The Nasdaq was higher by 16.13 at 4337.23 and the Russell 2000 was up 9.80 to close at 1176.62. This was the third day in a row the up volume had no buying conviction behind it. The previous down day, on June 12, had in excess of 100 million shares traded in the S&P 500 Trust Series ETF (SPY). Thus, the markets continue to be held up by the Federal Reserve and its policy statement Wednesday. It has become very unfortunate the stock market and the Federal Reserve are one and the same. I do not think the stock market was intended to be controlled by FED policy. Fundamental stock and technical analysis has taken a back seat. The most extraordinarily overbought sector continues to be the semiconductor stocks. The Market Vectors Semiconductor ETF (SMH) has a 99.24 algorithm number. That is on the daily chart. Both the weekly and monthly algorithm numbers are also in overbought territory. That is also called froth and euphoria. These numbers can be found at www.strategicstocktrade.com. The Russell 2000 index is now showing signs of overheating on the daily charts. This comes on the heels of Trend Bearish signal. The Russell 2000 is down almost 3% from its March 2014 highs. The small-cap stocks, stocks with a market cap less than $4 billion according to my internal process, are signaling a 19:1 ratio of Extraordinarily overbought versus extraordinarily oversold stocks. This is froth and euphoria. Moving on to some economic numbers released on Tuesday, the Consumer Price Index (CPI) showed a +0.4% gain versus an expected gain of 0.2%. This is known as inflation accelerating and something that I have been mentioning for some time now in my articles. The three sectors that are bullish and you want to own as traders and investors in 2014 are the Select Sector Energy ETF (XLE) the Select Sector Utilities (XLU) and the Vanguard REIT ETF (VNQ). The three sectors you do not want to own are the consumer discretionary, housing and financial sectors. In summary, I continue to be extremely cautious with this market. The buy signals are just not there and the sell signals are in abundance, along with many negative divergences. At the close of trading on Tuesday, I continued to be short Broadcom (BRCM) and Fairchild Semiconductor (FCS). I also added a new long position in Deutsche Bank (DB). This has an extraordinarily oversold number, one of the very few in the large-cap sector. At the time of publication the author was short BRCM and FCS and long DB. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff. >>Why You Shouldn't Be Afraid of Rising Interest Rates

Facebook Is Riding High on Mobile Growth

This era of on-the-go technology or as we fondly call it, wearable technology, has come into being in a big way, and the reason for its unfathomable growth has been the need for people to stay connected and be in possession of technology at all times. Hence, for a greater part of this decade, mobile devices will be of central importance to tech giants like Facebook (FB) and Google (GOOG), who have already started executing on the solid strategies with respect to mobile technology. For Facebook, there are already 1 billion monthly active users on mobile, and mobile has a dominant influence on each of the company's strategies.

In the fourth quarter, 2013 earnings call of the company, this is what the CEO Mark Zuckerberg had to say regarding the business of Facebook:

"Overall, 2013 was an important year for us. If 2012 was the year we turned our core product into a mobile product, then 2013 was the year when we turned our business into a mobile business. I expect 2014 will be the year when we begin to deliver new and engaging types of mobile experiences."

Mobile Is the Pivot

Thus, it is significantly clear that the company is hard focused on expanding its business in the lines of mobile technology. In fact, the acquisition of Whatsapp, an Internet messaging service, for a whopping $19 billion was done with the motive of expanding its mobile reach. While a score of analysts criticized the deal as overvalued, it was but a small step in building a colossal business. Let me give a few significant numbers related to growth and share of mobile in Facebook's overall business.

Of Facebook's overall daily active users, only 55% access it from their mobiles: That's around 441 million people. Meanwhile, the separate Instagram and Facebook Messenger apps each have more than 200 million monthly active users, with WhatsApp – bought by Facebook for $19 billion earlier this year – already used by 500 million people.

This is translating into more money for Facebook through advertising: 59% of its $2.3 billion of ad revenues in the first quarter of this year came from mobile, a proportion that stood at 30% in the first quarter of 2013, and just 14% in the third quarter of 2012.

E-Commerce Is the Way to Go

Even though the movement of high-profile executives in the Silicon Valley is not anything new, it still gives reasonable cues to shareholders about the prospects of the company and the shift of PayPal's president David Marcus to Facebook is definitely a positive development. David will help Facebook develop its e-money transfer efforts. Marcus is PayPal's president and he will resign his position on June 27 to join Facebook as head of the Messenger product.

This is also a cue to the big plans of Facebook regarding e-commerce because it is now transitioning into a holistic platform that provides the sellers with a two-fold advantage, provides an easy portal to effect sales and provides a bounty of information to the business owners/advertisers that helps the companies to leverage their sales by building encompassing sales strategies. Now, the induction of PayPal's president will be the icing on the cake as Facebook will prove to be a huge challenge to the likes of Amazon (AMZN) and eBay (EBAY).

Final Words

Coming back to Facebook, it is amply clear that the company has massive scope of growth in a high-growth area. As reported above, only 55% of Facebook's user base uses the social networking site through their mobile phones, indicating enough scope of expansion. Though the stock is slightly overvalued at this point in time with a forward P/E of 36, still the massive growth opportunities warrant the presence of Facebook in your tech portfolio.

About the author:Riddhi KharkiaA practicing Chartered Accountant based out of India. I have keen interest in analyzing tech stocks that are driven by value.

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General Motors Company Recalls 1.5 Million More Vehicles Due to Power Steering Defect (GM)

General Motors Company (GM) reported on Monday that it is recalling an additional 1.5 million vehicles as they are expected to have problems with power steering.

These reports come just two weeks after the company’s last announcement of recalled vehicles. So far in 2014, GM has recalled a total of 6.26 million vehicles.

The company reported on Monday that six models are being recalled, three of the models are expected to have the ignition switch defect. The defect has caused 13 deaths.

With the additional recalls, GM now expects a charge of $750 million in the first quarter.

General Motors shares were down 16 cents, or 0.46%, during pre-market trading Tuesday. The stock is down 15% YTD.

U.S. stocks retreat; Nasdaq off 1%

NEW YORK (MarketWatch) — U.S. stocks reversed early gains and finished Friday lower but still recorded modest weekly gains. The main indexes marched higher in the morning, with the S&P 500 hitting a new intraday record of 1,883.97, but gains dissipated by afternoon, as stocks were hit by gyrations due to the so-called quadruple witching day, or expiration of options.

The S&P 500 (SPX)  ended the day 5.61 points, or 0.3%, lower at 1,866.40. The benchmark index recorded a weekly gain, rising 1.4% for the week.

The Dow Jones Industrial Average (DJIA)  added 28.28 points, or 0.2%, to 16,302.77. The blue-chip index gained 1.5% over the past five trading days.

/quotes/zigman/85342/delayed/quotes/nls/ibb IBB 246.01, -12.24, -4.74% Investors let air out of biotech amid overheating, pricing concerns

The Nasdaq Composite (COMP)  finished the day 42.50 points, or 1%, lower at 4,276.79, with the biotech stocks hit the hardest on the index . iShares Nasdaq Biotechnology ETF fell 4.7%. Friday's losses dented the tech-heavy index's weekly gain to 0.7%.

"Today's action in the market was mostly technical. Perhaps, investors had second thoughts about the events in Russia. Typically, on the days when options expire, gyrations can cause selloffs," said Peter Cardillo, chief market economist at Rockwell Global Capital.

Stocks had fallen Wednesday after Federal Reserve Chairwoman Janet Yellen suggested the central bank could begin raising interest rates about six months after it ends its bond-buying program. However, they mostly recovered on Thursday on the back of upbeat manufacturing data from the Philadelphia's Federal Reserve.

Minneapolis Fed President Narayana Kocherlakota, the sole dissenter on the FOMC, released a statement on Friday in which he criticized the Fed's new guidance, saying it "weakens the credibility of FOMC's commitment to target 2% inflation" and "fosters policy uncertainty and thereby suppresses economic activity."

Other Fed speakers on Friday included St. Louis Fed President James Bullard, as well as former Fed Chairman Ben Bernanke.

Fed Gov. Jeremy Stein is scheduled to speak on 'incorporating financial stability considerations into a monetary policy framework' at 7:20 p.m. Eastern.

Among individual stocks, Unwired Planet (UPIP) , an intellectual property company focused on the mobile industry, soared 49% after news that Chinese computer-maker Lenovo Group Ltd. (HK:0992)  was buying 21 of its patent families for $100 million.

CommScope Holding Co. Inc. (COMM)  jumped 10% after the telecommunications-gear maker raised its guidance for the current quarter in its earnings report. The company said it expects to earn between 43 cents and 47 cents per share on revenue of $900 million to $925 million.

Shares of Nike Inc. (NKE)  were down 5.1% after the company late Thursday reported fiscal third-quarter adjusted profit above analysts' forecasts. Sales increased 13%, but the sneaker giant warned that a stronger dollar will remain a drag on earnings.

Symantec Corp. (SYMC) slid 13% after the security-software maker fired Chief Executive Steve Bennett late Thursday and replaced him with board member Michael Brown.

Darden Restaurants Inc. (DRI)  rose 2.8% even as the firm said profit and sales fell compared with a year earlier. Darden is spinning off its Red Lobster chain.

In other financial markets, the dollar pulled back after rising on Thursday on the back of Yellen's dollar-supportive interest-rate comments. The weaker greenback provided support for oil and metals, which moved broadly higher. Asian markets closed mostly in the black, and European markets followed them higher early on Friday.

More must-reads from MarketWatch:

Gold is beating nearly every investment this year

5 ways the collapsing yuan could affect your money

Mt. Gox finds 200,000 bitcoins it thought were lost

Consumers have had enough, ‘rage survey’ says

Americans are not very happy consumers. We're frustrated and angry—and for good reason.

More people than ever are dissatisfied with the products and services they buy, according to a new report from Arizona State University's W.P. Carey School of Business. And when there is a problem, we're less happy with the customer service we receive.

The number of households experiencing "customer rage" — they were very or extremely upset about the company response when they complained — jumped to 68% from 60% in the last survey, in 2011.

More of us are expressing that rage by yelling and cursing at customer-service representatives than two years ago. Yelling rose to 36% from 25% of the time, while cursing jumped to 13% from 7%.

CELL PHONES: Which company has best service?

'CONSUMER REPORTS': Has its own naughty and nice list

ON-CALL HOURS: They're hurting part-time workers

Other key findings from the 2013 Customer Rage Survey:

• The percentage of people with customer service problems rose to 50% from 45%.
• Most of those who complained (56%) said they got absolutely nothing as a result, up 9 percentage points.
• The product most often responsible for enraging us is cable or satellite TV.
• Though many people associate the government with customer-service issues, 98% of the most serious problems stemmed from private companies.

"These numbers have just steadily increased, and it's disconcerting to see," said Professor Mary Jo Bitner, executive director of the Center for Services Leadership at Arizona State. "We all know that some companies are doing a good job at this — they provide great products and service — but on average, many are not doing this very well."

Everyone in business realizes the importance of good customer service. Solve a problem and you create a loyal customer who will tell 10 to 16 others about your company. Fail to make customers happy and you've made enemies who will each tell an average of ! 28 people about their terrible experience.

It turns out that bad customer service is worse than no customer service. People who receive poor response become 12% less brand loyal than if they didn't bother to complain at all.

"Given the fact that most complainants are not satisfied, corporate America is spending billions of dollars on customer care programs that are actually losing them customers," Bitner said.

Why is this happening?

How could so much money and effort have been put into customer service, and yet satisfaction levels are no higher than they were in the mid-1970s?

The report blames poor execution. Many companies are "doing all the right things the wrong way," it said. The investment in corporate complaint-handling departments has not kept up with customer expectations.

"It ranges from how they do their training, to the various policies they put in place and bad use of technology," said Scott Broetzmann, president and CEO of Customer Care Measurement and Consulting, which designed the survey and analyzed the results. "It's hard to believe that companies could spend as much as they do and get as little back as they seem to be getting."

To reduce costs, many companies try to drive customers who need solutions to the Internet. A Web chat or email complaint is much cheaper to handle than a phone conversation with a service agent. But it's much harder to give the customers what they're looking for in that online environment.

Unhappy customers want to talk to someone on the phone and get an answer quickly. The survey found they are 11 times as likely (66 versus 6%) to make a call as they are to use the Internet to complain.

What do people want when we contact customer service? We expect the companies we do business with to be there for us when there's a problem after the sale. But all too often, they're not.

It's hard to reach them — those phone trees and hold times seem endless — and it's often impossible to get a straight answer.

"The ! No. 1 thing people want is to be treated with dignity and courtesy," said Jack Wilkie, chief marketing officer with customer service training company NOVO 1, which conducted the survey. "People also want that representative to be knowledgeable, helpful, friendly and patient."

The goal, of course, is to get the problem solved. But we also want an apology, and a lot of people don't get it. The survey found that when companies added a freeremedy, such as an apology, to any monetary relief, customer satisfaction doubled.

And if a problem is not handled to our satisfaction, we are more likely to talk about it on social media. That behavior has nearly doubled, to 35% from 19% in 2011 .

Lessons to be learned

Most businesses see customer service as an expense. This study shows they need to consider it as way to improve the bottom line.

"There's clearly a benefit to better customer service and a real cost for poor service," Broetzmann said. "Businesses are losing billions of dollars a year because of lousy customer service."

© CNBC is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.

China moves closer to reopening IPO floodgate

China moved closer to end a 13-month long moratorium on initial public offerings, releasing guidelines on recently proposed fundamental reforms of the way companies raise funds in the country's stock market.

At the same time, China unveiled guidelines on the issuance of preferred stocks, which offers listed firms a fresh channel for funding to shore up capital base, especially listed banks.

Two weeks ago, China's top leaders promised, in a blueprint for economic and social policies over the next decade, that it will push for reforms of a registration-based stock issuance system while promoting fundraising activities in the equity market through a variety of channels.

Both the moves are aimed to refine and improve the financing structure of China's capital markets, said Sinolink Securities analyst Huang Cendong.

The long-awaited launch of the IPO reform plan indicates an imminent restart of the country's IPO market, where more than 760 firms are queuing for a listing.

China shut the door to IPOs in the country in November 2012, just before a once-in-a-decade leadership transition, a move aimed at boosting the long-suffering stock market, analysts said. The reform plan marks a step toward a shift to registered-based IPO system, a system widely used in developed markets where the regulator focuses on whether a firm seeking a listing meets the requirement for information disclosure.

Currently, China adopted an approval-based IPO system where the regulator focuses on whether an issuer can sustain its operation and whether it will be able to stay profitable, which leads to a complicated and opaque examination process that can take multiple rounds of reviews and several years before listing.

"We believe the reform laid out the groundwork for an introduction of registered-based IPO system," the China Securities Regulatory Commission said in a transcript of answers to questions from reporters on the reform plan.

The shift is a significant easing of government control over China's IPO market, which channeled 488 billion yuan ($80 billion) to issuers in 2010, the world's largest IPO market that year.

The approval-based IPO system has long been criticized for distorting supply and demand and artificially inflating valuations of new listings in one of the world's largest stock markets.

Under the guidelines on further reform of the IPO system, the China Securities Regulatory Commission said it will focus on the review of compliance of IPO plans, while it will let investors and the market judge the value and risks of IPOs. Once a company gets the go-ahead to seek an IPO, the commission said it will allow the market to decide the timing of it and how it works. Following the release of the guidelines, firms seeking IPOs will need around one month to prepare, the commission estimated. Around 50 firms are expected to have IPO preparation done, allowing them to list by January 2014, the commission added.

The review of stock offerings focuses on the information disclosure of the issuer, according to the guidelines which govern the IPO application; the pricing of stocks; the share placement; responsibilities of market participants; and measures to crack down on fraudulent listing.

"The market-oriented reform will make the issuer and intermediaries to shoulder more responsibility while strengthen the protection for smaller investors," said Wang Jianyong, a partner with Haiwen & Partners, a law office that advises companies seeking a listing in China.

Issuers, underwriters and other intermediaries should commit to compensate investors that suffer from losses incurred by falsehoods, misleading statements or major omissions in IPO documents, according to the guidelines.

According to the guidelines, controlling stakeholders, as well as board members and senior executives who own shares, should commit that they won't unload shares below the IPO prices for two years after the lock-up period ends. If the shares of a firm close below IPO prices six months after listing, these shareholders must promise to extend the lockup period by at least another six months, according to the guidelines.

"The sentiment in the stock market will likely be hurt with the upcoming IPO restart," Mr. Wang said.