Q1 Earnings Take Center Stage on Wall Street

George Brooks  |

Investor’s first read - Brooksie’s edge before the open

Tuesday, April 17, 2012        9:08 a.m. ET

DJIA: 12,921.41

S&P 500:   1,369.57

Nasdaq Comp.: 2,988.40

Russell 2000:  798.08

TODAY: Look for a firm open.  I don’t think concerns for the economy or for Spain’s sovereign debt woes have left the scene. Q1 earnings stand to provide enough of a boost to drive stocks  higher, near-term. We have a shot at  DJIA 13,095  (S&P 500: 1394) this week. (Again, no room for rally failures).

Yesterday’s post headlined, “No Room for a Rally Failure.”  Since giving back all of a day’s gain is a sign of weakness, I felt it was necessary to warn readers of a possible fake-out. We didn’t get a clear signal either way.  While the DJIA closed with a 71-point gain, the Nasdaq Composite and S&P 500 posted minor losses.

But these two bellweather  indexes were distorted by a 4.15% drop in Apple (AAPL) and 2.97%  drop in Google (GOOG). Combined, these two sport a market cap of $383 billion.

It all has to do with the construction of the DJIA, Nasdaq and S&P. The DJIA is price-weighted, the latter two are weighted by market capitalization (shares x price).

The DJIA can be distorted by higher priced stocks, i.e, a 10% move in IBM (IBM) would have 10x the impact on the DJIA as a 10% move in General Electric (GE). If you want to calculate how much a move in one or more of the  30 Dow stocks has on the average on a given day, divide the point change by the Dow “divisor” (.13213263), however the divisor changes frequently.

Housing Starts  dropped 5.8% in March to 654,000 units following a decline of 2.8% in February. However, Building Permits were up 4.5% in March vs 4.8% in February, suggesting an improvement in “starts” is in the offing.  As stated months ago, I think this industry is turning the corner and will begin contributing to the economic recovery later in the year.

March Industrial Production was reported at 9:15 today, too late for this post.

For the moment, the European scene is quiet as Spain was able to sell 3.1 billion euros short-term debt, slightly more than expected.


With concern for health  the U.S. economic expansion mounting after a disappointing April 6 Employment Situation report, the Street will be looking for reassurance that the economy is still improving.  This week will shed light on that.


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Retail Sales (8:30) rose 0.8% in March three times the economist’s 0.3% estimate following a strong 1.0% in February after a gain of 0.6% in January. Eleven of 13 categories posted increases.

Empire State Manufacturing Survey (8:30)  The pace of growth in the New York area’s manufacturing slowed in April to 6.6 from 20.2, following  a 5- month, 19,4 point run since November.

Business Inventories (10a.m.) Rose 0.7% in January, inventory-to-sales ratio remained at 1.27.

Housing Market Index (10a.m.) A survey by the NAHB which rates the economy and housing market conditions, including current home sales, new home sales, projected sales and traffic of prospective buyers.

:30) Rose a strong 1.1% in February after a gain of 0.6% in January

Empire State Manufacturing Survey (8:30) Strength in inventories bumped the index ahead  3.5% in March.

Business Inventories (10a.m.) Rose 0.6% in February following an increase of 0.8% in January, inventory-to-sales ratio remained at 1.27.

Housing Market Index (10a.m.) A survey by the NAHB which rates the economy and housing market conditions, including current home sales, new home sales, projected sales and traffic of prospective buyers. April’s Housing Market Index  dropped to 25 from 28 in March. A Bloomberg survey for the index of 48 economists ranged between 27 and 30.


Housing Starts (8:30) Dropped 1.1% in February after a 3.7% gain in January. Permits rose 5.1% after a 1.6% gain in January.

Industrial Production (9:15) Was flat in February due to a drop in mining. Manufacturing rose 0.3% after a jump of 1,1% in January.


Jobless Claims (8:30) Rose 13,000 in the April 7 week to 380,000 Four-week moving average was  up 4,250 to 368,5000.

Existing Home Sales (10 a.m.) Slipped 0.9%  in February to a 4.59 million rate.

Philly Fed Survey (10a.m.) measures general business conditions in the Philadelphia region. The index jumped sharply in March to 12.5 from 10.2.

Leading Indicators (10a.m.)  Surged 0.7% in February with the help of improving jobless claims. Also contributing were the interest rate spread (Fed Fds/10 yr treasury rate), stock prices and building permits.

George  Brooks


The writer of  Investor’s first read, George Brooks,  is not registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

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