The wait is finally over.
On Wednesday, the NYSE Composite Index broke up and out of a long, stifling trading range going back to July. Many factors have capped the upward progress of the U.S. stock market, including doubts about the health of the global economy, a slowdown in U.S. macro data over the winter, worries over the impact of lower energy prices on corporate earnings, and the specter of interest-rate hikes from the Federal Reserve.
Now, investors are growing more confident as U.S. consumers show their resolve (after a rise in retail sales), industrial production and inflation remain soft (increasing odds of a delay in any rate liftoff into late 2015 or 2016), and Q1 earnings so far aren’t as bad as expected, with Intel Corporation (NASDAQ:INTC) and bank results in focus.
In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 gained 0.5%, the Nasdaq Composite gained 0.7%, and the Russell 2000 gained 0.8%.
Crude oil was strong again, gaining 5% to close at $55.95 a barrel on bullish inventory data and reports of a decline in drilling activity. That helped lift energy stocks in a big way, rising 2.3% as a group.
Edge subscribers benefited with a 4.4% gain in their Market Vectors Oil Services ETF (NYSEARCA:OIH) position, which is up 8% since it was added on April 6.
Semiconductors were also strong after Intel reported inline results after the close on Tuesday. Sentiment is improving on the industry group on signs of a turn in PC demand and the need for inventory restocking in the supply chain. INTC was upgraded by analysts at RBC and Wedbush. That helped push the April INTC calls held by Edge Pro subscribers to a gain of 80%.
There was little impact from a 0.6% drop in industrial production in March, worse than the 0.2% drop analysts were expecting. This was the largest decline since August 2012 with utilities the major drag.
The emerging thesis is that recent softness in the economic data will keep central bankers accommodative — keeping the Fed on hold with rate hikes, keeping the European Central Bank going with its new bond buying program, and encouraging the People’s Bank of China to join in with new stimulus.
The positive vibes look set to continue into Thursday with Netflix, Inc. (NASDAQ:NFLX) up nearly 12% in after-hours trading after reporting strong subscriber growth and an earnings miss — though one that would’ve been a beat without heavy foreign exchange losses.
Buyers are rushing back in as bargains abound. I’m seeing impressive breakouts in a number of blue-chip icons including Caterpillar Inc. (NYSE:CAT) which I highlighted in a recent post here. I recommended the April $82.50 CAT calls to Edge Pro subscribers, who just trimmed the position for a gain of nearly 110%.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
