Editor’s Note: Due to the market holiday Friday, April 10, your next issue of The Daily Trader’s Alert will be available Monday, April 13.
Wednesday, the stock market overlooked a poor Q1 earnings report from Alcoa (AA) and instead focused on the retail sector and the insurers.
Late Tuesday, Bed Bath & Beyond (BBBY) reported Q4 earnings of 55 cents a share versus analysts’ estimates of 44 cents a share, and Family Dollar Stores (FDO) met analysts’ Q2 estimates of 60 cents a share but went on to predict that its third quarter would exceed the most optimistic forecasts. As a result, the retail sector gained in anticipation of reports from some of the larger retailers.
Adding to optimism for the retailers was a report from the Commerce Department that wholesalers in February made the biggest cut ever in their inventories.
The financial sector fell yesterday as a result of weakness in regional banks (negative 2.4%), investment banks, and brokers (negative 1.2%). But the group would have posted a significant loss had it not been for the Treasury Department’s news that they would extend bailout funds to insurers.
Although no official statement of policy has yet been forthcoming, the shares of Lincoln National (LNC) and Hartford (HIG) rose sharply as did the rest of the insurance group.
Even though stocks closed higher it was a rocky session — in and out of negative territory twice before a rally in the last 30 minutes of trading saved the index from its third-consecutive loss. Volume was light in anticipation of the Good Friday holiday and the beginning of Passover last evening.
At the close the Dow Jones Industrial Average (DJI) was higher by 48 points at 7,837, the S&P 500 (SPX) gained 10 points at 825, and the Nasdaq (NASD) gained 29 points and closed at 1,590.
The New York Stock Exchange traded 1.3 billion shares with advancers ahead by 3-to-1, and the Nasdaq traded 625 million shares with advancers there ahead by just under 3-to-1.
The May crude oil contract rose 23 cents to end the day at $49.38 a barrel, and the Amex Energy SPDR (XLE) rose 56 cents to $44.30.
The April gold contract rose $2.60 to $884.80 an ounce. The PHLX Gold/Silver Index (XAU) fell 59 cents to $123.34.
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What the Markets Are Saying
Even if prices appear to be clawing their way through the overhead supply at around Dow (DJI) 8,000 and S&P 500 (SPX) 825 to 875, the going is getting tougher.
The highest that the S&P has achieved so far was the high of Thursday, April 2, at 846 before it was turned aside on a minor reversal this Tuesday. Volume has been on the low side on both advances and declines but this week that was no doubt due to the impending holiday weekend.
While the more senior averages have been slugging it out and making just minor progress, the Nasdaq (NASD) has been moving along at a faster pace helped by the dramatic runs in the technology sector and more recently in the consumer discretionary sector.
The major resistance band in Nasdaq is at 1,290 to 1,652 with the January closing high of 1,652 its next objective. And if Nasdaq can conquer it, perhaps it could claim to be the first to have reversed its major trend from bear to bull.
But to claim the prize it will also have to break though the Nov. 4 closing high of 1,780 and that’s a real reach — at least for now. With the internal indicators so thoroughly overbought and sentiment against a major move higher, it is probable that Nasdaq, like its brothers, will have to be content with a pullback and broader consolidation that could last for the remainder of this year.
And speaking of sentiment indicators: Standard & Poor’s points out that Jason Goepfert, of sentimentrader.com, has noticed a major shift in Rydex funds to their most bullish stance since August/September 2000 and October 2007 — which were terrible times to invest. Since this is a recognized contrary indicator, it may be telling us that the rally has almost run its course and it’s time to go to the contra-Exchange-Traded Funds (ETFs).
Today’s Trading Landscape
Earnings to be reported include: Adams Express, A-Power Energy Generation Systems Ltd, CanWest Global Communications Corp, CardioDynamics Int’l, Chevron, Christopher & Banks, FCStone Group, Franklin Covey Co, Matrix Service, Movado, Northfield Labs, Penford, Posco, Sinovac Biotech Ltd, and Zep.
The following economic reports are due today: Initial Jobless Claims for the week of April 4 (the consensus expects a decrease of 4,000), February Trade Balance (the consensus expects $35.9 billion), March Import Prices (the consensus expects 0.9%), DJ-BTMU Business Barometer for March 28, and EIA Natural Gas Inventories.
Late news: The Bank of England kept its key interest rate unchanged at 0.5%. Costco (COST) said that same-store sales were down 5% in March. ING Groep (ING) will divest of $10.6 billion in noncore assets.
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