Financial stocks again took center stage Wednesday, but it wasn’t until the last 25 minutes of trading that a surge of high-volume buying hit the sector. The result was a gain for the major indices after flopping back-and-forth between positive and negative territory for the entire day.
Anticipation of JPMorgan Chase’s (JPM) reports earnings this morning helped focus buying in the financial sector, taking it to a gain of 5.6% for the day. This morning, JPMorgan reported Q1 of 40 cents versus an estimate of 32 cents.
The buying also pushed nine of the 10 sectors in the S&P 500 (SPX) to a positive closing, too.
The only sector to trade with a loss was Technology which closed 0.7% lower. Intel (INTC) led the group lower following its earnings report on Tuesday night. The company announced better-than-expected earnings and in a conference call said that a bottom in computer sales had been made but refrained from estimating an increase in its revenues for the remainder of the year. Google (GOOG) traded higher ahead of its earnings report, which comes after the close today.
After a slow start with the Dow Jones Industrials (DJI) off 50 points, a brief rally resulted from the release of the Federal Reserve’s regional review of economic activity (The Beige Book). The Fed’s review showed that five of the 12 districts reported “some hopeful signs that activity in some sectors was starting to stabilize.”
In other economic activity, March industrial production fell 1.5% and capacity utilization came in at 63.3%.
At the close, the Dow Jones Industrial Average (DJI) gained 109 points closing at 8,029, the S&P 500 (SPX) rose 11 points to 852, and the Nasdaq (NASD) gained one point, closing at 1,627.
On the New York Stock Exchange, 1.5 billion shares were exchanged with advancers ahead by 5-to-2, and on the Nasdaq 678 million shares traded with advancers there ahead by almost 2-to-1.
The May crude oil contract lost 16 cents ending at $49.25 a barrel, and the Amex Energy SPDR (XLE) gained 6 cents to $45.04.
The June gold contract rose $1.50 ending the day at $893.50 an ounce. The PHLX Gold/Silver Index (XAU) rose $1.37 to $125.12.
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What the Markets Are Saying
The major indices are finding support off of a trendline drawn from the correction lows of the small stair-step consolidations mentioned in yesterday’s Daily Trader’s Alert. That trend line also coincides with the 20-day moving average which for the S&P 500 (SPX) now sits at about 820.
Monday’s high at SPX 864 got close to the next area of resistance at 875 to 900, and the next run-up could reach into the heart of that barrier. With most stocks and all indices now very overbought, it’s my estimate that the next downward correction with take place within the 975 to 900 zone.
For the Dow Industrials (DJI), the picture is slightly different with resistance at 8,000 to 9,000. But the intermediate bearish resistance line at around 8,185 is the next real barrier with support at the 20-day moving average at 7,780.
The Nasdaq (NASD) almost hit its January high of 1,665 on Monday when its intraday high rose to 1,660. The technology sector has been sluggish lately, so look for a series of reversals in that sector which could tell us that a major reversal is about to begin.
For now, however, we’re trading on the long side with very few new long-term positions. But both traders and investors should position themselves for a quick correction (down) within the next week or so.
Today’s Trading Landscape
Earnings to be reported include: American River Bankshares, Amphenol, Amylin Pharmaceuticals, Associated Banc-Corp, Baxter Int’l, Biogen Idec, Briggs & Stratton Corp, Charlotte Russe Holding, Courier Corp, Cypress Semiconductor and Cytec Industries.
Fairchild Semiconductor Int’l, Gannett, Genuine Parts, Google, ICU Medical, Illinois Tool Works, Insteel Industries, Intuitive Surgical, JPMorgan Chase & Co, Knoll, Mission West Properties, Myers Industries, Nokia, Parker Hannifin Corp, People’s United Financial, Polaris Industries and PPG Industries.
Renaissance Learning, Sherwin-Williams, Simmons First National, Sonoco Products, Southwest Airlines, Tempur Pedic Int’l, Titan Machinery, Ultratech, Umpqua Holdings Corp, USA Truck, Vascular Solutions, and Vertex Pharmaceuticals.
The following economic reports are due today: initial jobless claims for the week of April 11 (the consensus expects an increase of 6,000), March Housing Starts (the consensus expects a 7.4% drop), April Philadelphia Fed Business Index (the consensus expects negative 32.3), and DJ-BTMU Business Barometer for April 4.
Late news: Harley Davidson (HOG) missed estimates for Q1 by a penny at 50 cents versus an expected 51 cents. AIG has sold the AIG Private Bank to Abu Dhabi-based firm and is negotiating to sell its car-insurance unit to Zurich Financial Services. Nokia’s (NOK) net plunged 90%, reporting 122 million euros versus an estimate of 306 million euros.
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Sam Collins is a registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.
