Thursday, April 21, 2011 9:24 am EDT
NOTE: The market will be closed Friday.
S&P 500: 1330.36
Nasdaq Comp.: 2802.51
Russell 2000: 839.45
The S&P 500, Nasdaq Composite and Russell 2000 did not reach bull market highs yesterday, but the DJIA did with its 187-point surge aided by strength in five of the 30 Dow stocks, which accounted for half of the increase. The five stocks were Chevron (NYSE: CVX), Exxon Mobil (NYSE: XOM), Caterpillar (NYSE: CAT), Boeing (NYSE: BA), and United Technologies (NYSE: UTX).
As expected, the S&P 500, Nasdaq Comp., and Russell 2000, gapped at the open, suggesting it was difficult, as I warned, to “buy the open” without paying up for stocks and still show a gain for the day.
It’s too early to tell whether the BIG money will use current strength to lighten up. Historically, the six months between May 1 and November 1 underperforms the “best six months” (Nov. 1 to May 1). Not cast in bronze, but a consideration before getting careless.
The market can underperform the market we have been in over the last eight months and still offer great opportunities, though more precise timing would be necessary to max it.
Today: Another strong open with a new bull market high for the DJIA, but a slow-down most likely at the close before the long weekend.
Last week’s weakness in the market led me to suspect the Street was concerned about Q1 earnings. I was wrong.
Apparently, I was not alone in underestimating Q1 earnings. Three quarters of the 59 S&P 500 companies reporting Q1 earnings this month have beaten estimates. Intel (INTC) gave chipmakers a reason to rally, its Q1 earnings jumped 30% on a 25% increase in sales. Wynn Resorts (WYNN) $1.38 beat estimates by 64 cents, Apple (AAPL) by 20%, BJ’s (BJRI by 32%, Datalink (DTLK) by 33%, Edwards Lifesciences (EW) by 26%, Knight Capital (KCG) by32%Polaris (PII) by 91%, Tractor Supply (TSCO) by 50%
Expect a new buzz word to emerge, “SAVEGO,” short for save-as-you-go, the implementation of automatic, across-the-board spending reductions and higher taxes as an approach to cutting deficits.
Contributing to yesterday’s buoyancy was a jump in the sales of U.S. homes, though 40% of the sales were distressed properties. At some point I would expect the more reasonably priced attractive homes in attractive neighborhoods would start to sell. People need a place to live Some 90% of the working population is employed and houses are cheap relatively speaking, and compared with rental properties and prices several years ago.
Jobless Claims reversed last week’s rise with a decline of 13,000, a positive, though the real issue now is Q1 earnings.
We get the Philly Fed (regional business) Survey and Leading Economic Indicators at 10 o’clock today.
For the period ending March 11, the Philly Fed Survey reached 43.4, the strongest reading for the current recovery and in fact, strongest since 1984. Another increase is expected for April.
February’s Leading Indicators posted a plus 0.8 percent vs plus 0.1 percent in January. A slightly positive reading is expected for March.
Looking back, I think S&P’s decision to release its downgrade of its outlook for long-term U.S. debt on Monday morning was injurious to investors. A better time to have done it would have been Friday after the close when the announcement could have been accompanied by more details for the press (and more importantly, investors) to digest.
Had S&P done that, I seriously doubt we would have had the carnage on Monday that we had. Perhaps that was not possible, only S&P knows. Assuming a Monday morning was the only time it could release it, so be it. Otherwise I think it was a bad decision and S&P owes the investment community an explanation.
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