With a basket of corporate earnings beats and more optimistic manufacturing data from China, stocks rose steadily Thursday. All of the major indices closed either at or close to new highs.
The Dow industrials opened higher, propelled by better earnings from 3M (MMM). Ford Motor (F) beat Q3 earnings estimates and rose 1.4%, PulteGroup (PHM) gained 7% on a revenue increase due to higher home prices and closings, and Alaska Air (ALK) jumped 4% on better earnings.
At Thursday’s close, the Dow Jones Industrial Average was up 96 points to 15,509, the S&P 500 gained 6 points at 1,752, and the Nasdaq jumped 22 points to 3,929. The NYSE traded 716 million shares and the Nasdaq crossed 499 million. Advancers were ahead of decliners on the Big Board by 1.4-to-1 and on Nasdaq by 1.6-to-1.
Despite highs in other indices, the Dow is still struggling with a new high. It’s not that it’s done poorly this year, up 18.35%, but it has not kept up with the junior indices and especially the tech-oriented averages like the Nasdaq, which has gained over 30% since Dec. 31.
So far, the Nasdaq has succeeded in maintaining the breakout from the top of its bull channel by holding above Wednesday’s low at 3,887. But, like the other indices, it is overbought on all of our internal market indicators.
Conclusion: Sy Harding, of Street Smart Report, said Thursday, “The best signals tend to be triggered when the market and the technical indicators are oversold, and investor sentiment is in the depths of pessimism and bearishness.”
I agree and have often said that a market that reacts well to bad news is a market that should be bought. The stock market has been bucking the tide of pessimism all year, and those investors who bought in the first quarter and have held on have done so in a pressure cooker of bad news and threats of disaster. They are to be congratulated.
The objective now is to maintain those hard-earned gains. I’ve been encouraging investors and traders to use the current market strength to hold onto gains in stocks with average P/E multiples by employing strategies like buying puts, selling calls, etc., against those positions. Stocks with very high multiples should be sold. Meanwhile, traders should be on the long side of the market but protecting positions with solid stop-loss orders.
At some point, we will have a correction, and prudence dictates that we take a page from Mark Twain, who said: “I am more concerned with the return of my money than the return on my money.”
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.