Despite the highest level of consumer sentiment since September 2008, on Friday the markets traded mixed with temporary spurts of buying following by rounds of selling. Some of the off-setting trades had to do with March’s options expiring, but good news was ignored, too.
General Electric (GE) beat estimates as did Google (GOOG). Citigroup (C) beat revenue and earnings estimates. But it was as if the Street expected the gains since they were preceded earlier in the week by good reports from Wells Fargo (WFC), Intel (INTC), Goldman Sachs (GS), and others.
At the close, the Dow Jones Industrial Average (DJI) gained six points closing at 8,131, the S&P 500 (SPX) was up four points to 867, and the Nasdaq (NASD) gained three points to close at 1,673.
The New York Stock Exchange traded 2 billion shares with advancers ahead of decliners by over 2-to-1. The Nasdaq traded 846 million shares with advancers ahead by 8-to-5.
For the week, the Dow Jones Industrial Average rose 0.6%, the S&P 500 gained 1.5%, and the Nasdaq rose 1.2%.
On Friday, crude oil for May delivery gained 35 cents to $50.33 a barrel and the Amex Energy SPDR (XLE) rose 53 cents to $45.78. The gains were attributed to anticipated demand as a result of the slightly improving economic climate.
Because of the increased optimism, gold (June contract) fell $11.90 to $867.50 an ounce, and the PHLX Gold/Silver Index (XAU) fell $3.85, closing at $114.99.
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What the Markets Are Saying
The stock market is now up six consecutive weeks for a gain of 29% from its March 9 low for the biggest like-period gain since 1938. But signs of exhaustion are appearing in many sectors.
Until last week, the market was rallying on bad, even horrible, news. But last week’s positive surprise earnings and a better economic picture were greeted by the Dow (DJI) with just a .6% gain while the Nasdaq’s (NASD) spectacular news from several technology stocks produced a net gain for the week of only 1.2%.
And there is another problem — forced short-covering resulting from a push to announce earnings early from several major financial institutions leaves the market with a much-lower short position. And that leaves the market without the potential for another major squeeze of the shorts and, thus, vulnerable to heavy selling.
Finally, the key resistance zone of S&P 500 (SPX) 875 to 900 is formidable — stretching from October to mid-February. And just above that is the key closing high of January at 935.
This week the government will issue the important “stress report” of the financial institutions. They have already confirmed that no bank has failed the test, so we already know that the news will be good. And with almost 25% of the stocks of the S&P 500 reporting earnings this week, “buy the rumor, sell the news” may be confirmed as a solid investment strategy.
Today’s Trading Landscape
Earnings to be reported include: Allegiant Travel Co, Badger Meter, BancorpSouth, Bank of America Corp, Bank of Hawaii Corp, Boston Scientific Corp, Brown & Brown, Canadian National Railway, Capital City Bank Group, CDC Corp, Citizens South Banking Corp, Crane, Deltic Timber, Eaton, Eli Lilly, First Defiance Financial Corp, Forward Air, Halliburton Co, Hasbro, Healthways and Idex.
International Business Machines, JDA Software, Lincare Holdings, McMoRan Exploration Co, Mellanox Technologies Ltd, Nara Bancorp, Owens & Minor, Packaging Corp of America, Pinnacle Financial Partners, S&T Bancorp, Sensient Technologies Corp, Stryker, Texas Instruments, Trinity Biotech, Volterra Semiconductor Corp, Weatherford Int’l, and Zions Bancorp.
The lone economic report dues is the March Conference Board Leading Indicators (the consensus expects negative 0.1%).
Late news: PepsiCo (PEP) is bidding $6 billion for its two largest independent bottlers. Bank of America (BAC) reported Q1 of 44 cents versus estimates of 4 cents.
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