On Friday, it was all about the stress tests for financials and yesterday it was all about swine flu. And so, with swine flu at center stage, pharmaceutical stocks received lots of attention with emphasis on possible vaccine producers. Pharmas gained 0.5%, while the biotech stocks rose 2.0%.
Bristol-Myers Squibb (BMY) gained 2.19% and Pfizer (PFE) rose 2.43%; both are due to report earnings today. And our Trade of the Day, Gilead Science (GILD), gained 3.78%m while Roche Holdings Ltd. was ahead by 4.34%.
But other industries that would be impacted by a possible global epidemic, like travel-related companies, were hit hard. Delta Air Lines (DAL) fell 14%, Carnival (CCL) lost 13.51%, and Starwood Hotels (HOT) fell 10.9%. Pork-producer Smithfield Foods (SFD) was down 12.4% despite assurances from its management that there were no signs or symptoms of swine flu in its herd or employees in Mexico.
General Motors (GM), up more than 20%, led the Dow Industrials (DJI) on news that it may reorganize for the umpteenth time. But this time, it will cost the big automaker its Pontiac division and give majority ownership of the restructured company to the U.S. government. In return the company will receive $11.6 billion in federal aid. The new company will consist of just four core brands — Chevrolet, Buick, Cadillac and GMC.
Verizon (VZ) produced better-than-expected earnings but the stock closed lower. And banks and financial stocks were also poor finishers, with the sector off 3.2%.
At the close, the Dow Jones Industrial Average (DJI) fell 51 points to 8,025, the S&P 500 (SPX) lost nine points closing at 858, and the Nasdaq (NASD) was off 15 points at 1,679.
The New York Stock Exchange traded 1.4 billion shares and the Nasdaq did 740 million. On both exchanges, decliners outpaced advancers by about 2-to-1.
Futures tumbled across the board with crude oil (June contract) down $1.44 to $50.14 a barrel. The Amex Energy SPDR (XLE) closed at $45.20, off 87 cents.
Gold for June delivery fell $6.10 to 907.90 an ounce, and the PHLX Gold/Silver Index (XAU) closed at $123.61, down $2.13.
>
What the Markets Are Saying
Historically, it’s been the case that often some financially non-related event — or even a seemingly irrelevant happening — turns the markets.
So, while we may chat about earnings, P/E ratios, financial shortfalls, or the arcane language of technicians — the Moving Average Convergence/Divergence (MACD), internal indicators, and momentum, etc. — it could be that swine flu ends up as the trigger that terminates one of the most energetic bear-market rallies on record.
The market, however, has been overpriced for some time. As it approaches the huge barriers at Dow (DJI) 8,250 to 9,000 and S&P 500 (SPX) 875 to 900 and momentum begins to lag, we should expect at least a mild correction and perhaps even a reversal that ends up challenging the March lows. If it turns out that swine flu is the culprit, it is because stocks were poised at a cliff and whether it was to be swine or a car that pushed them over, they were going to plunge anyhow.
From my vantage point, we are on a cliff. We may fall or temporarily back off. But don’t let a bear-market rally fool you into thinking that a young heifer is in the pen — especially when at closer inspection the little fella turns out to be a pig.
Today’s Trading Landscape
Earnings to be reported include: A.M. Castle & Co, ACE Ltd, Actel, Advent Software, AGCO, AMB Property Corp, Amedisys, America Movil S.A. de C.V., American Campus Communities, American Commercial Lines, American Ecology, American Greetings Corp, American Safety Insurance, Anadigics, Anixter Int’l, Arch Capital Group, Arthur J. Gallagher & Co, ASM Int’l N.V., ATC Technology Corp and Avery Dennison Corp.
B&G Foods, Banco Bilbao Vizcaya Argentaria S.A., Bank of Florida Corp, Barrett Business Services, Beckman Coulter, Becton, Dickinson and Co, Bemis Co, BP plc, Bristol-Myers Squibb, Broadpoint Securities Group, Brookfield Infrastructure Partners LP, Bryn Mawr Bank, BTU Int’l, Buckeye Technologies and Buffalo Wild Wings.
Cabot Oil & Gas Corp, Carpenter Technology, Carter’s, Cascade Microtech, CE Franklin Ltd, Celanese Corp, Centene Corp, Ceradyne, Cerner Corp, Chicago Bridge & Iron, China Bak Battery, China Eastern Airlines, China Southern Airlines, Coca-Cola Enterprises, CommScope, Complete Production Services, Computer Task Group, Concurrent Computer Corp, Convergys Corp, Corn Products Int’l, Corporate Office Properties Trust, Coventry Health Care, CSG Systems and CTS Corp.
Daimler AG, Danaos Corp, DaVita, Desarrolladora Homex S.A. De CV, Deutsche Bank, Dine Equity, Double-Take Software, DreamWorks Animation SKG, EarthLink, EastGroup Properties, Ecolab, eHealth, Emcor Group, Empresas ICA S.A.B. de C.V., Encore Energy Partners LP, Entrust and ev3.
FalconStor Software, Fidelity National Information, First Marblehead Corp, First Potomac Realty Trust, FirstMerit, Fisher Communications, FPL Group, Franklin Resources, Franklin Street Properties, Fresh Del Monte Produce, G&K Services, Glatfelter, Group 1 Automotive, Hawaiian Holdings, HCP, Hecla Mining, Heidrick and Struggles Int’l, Hercules Offshore, Hertz Global Holdings, Honda Motor Co Ltd and Hospira.
ICON plc, Indiana Community Bancorp, Jacobs Engineering Group, Jones Lang LaSalle, Keynote Systems, Kulicke & Soffa, LAN Airlines, Lazard Ltd, LCA-Vision, LeMaitre Vascular, Life Technologies Corp, Lincoln Electric Holdings, Massey Energy Co, MDC Partners, Mead Johnson Nutrition Co, Mercury Computer Systems, Merit Medical Systems, Methanex Corp and Monolithic Power Systems.
Nalco Holding Co, National Instruments, Net Servicos de Comunicacao S.A., NewAlliance Bancshares, Nexen NTT DoCoMo, Office Depot, optionsXpress Holdings, Orbital Sciences Corp, PAB Bankshares, PACCAR, Parametric Technology Corp, Peet’s Coffee & Tea, Petro-Canada, Pfizer, Phase Forward , Portfolio Recovery Associates, Potlatch and Psychiatric Solutions.
QLT, Quaker Chemical Corp, Questcor Pharmaceuticals, RadiSys Corp, Range Resources, Rockwell Collins, Rocky Brands, RTI Int’l Metals, SeaBright Insurance Holdings, Seaspan Corp, Semitool, Signature Bank New York NY, Sociedad Qufmica y Minera de Chile SA, Spartan Motors, State Auto Financial, Stericycle, Sun Bancorp (NJ), Sun Microsystems, Superior Energy Services and Switch and Data.
Techne, Teleflex, Tellabs, Teppco, The Brinks Co, The Interpublic Group of Companies, The McGraw Hill Companies, The Scotts Miracle-Gro Co, Transalta Corp, Trimble Navigation, Trustmark Corp, TSYS, Ultimate Software, Under Armour, Unisys, USANA Health Sciences, Valero Energy Corp, VF Corp, Vignette, Vishay Intertechnology, VisionChina Media, Waddell & Reed Financial, Waters Corp, Watts Water Technologies, Websense, Weyco Group, Williams Controls, Young Innovations, and Zoran Corp.
Today’s economic reports include the International Council on Shopping Centers (ICSC) Chain Store Sales Index for April 24, Redbook Retail Sales Index for April 24, February S&P/Case-Shiller Home Price Index, April Conference Board Consumer Confidence, April Richmond Fed Manufacturing Index, API Oil Industry Report for April 24, and ABC/Washington Post Consumer Confidence for April 24.
Late news: An unnamed source leaked that Citigroup (C) and Bank of America have capital shortfalls according to The Wall Street Journal — this despite the prior announced date of reporting as May 5. Pfizer (PFE) Q1 is reported to be 54 cents versus a 49-cent estimate.
Get Sam Collins’ Daily Trader’s Alert e-mailed straight to your inbox each morning before the opening bell absolutely FREE!
In addition to getting instant access to his Daily Market Outlook, you’ll also receive, in the same e-mail, his Trade of the Day so you can start your day off right by positioning yourself for profits!
Click here today to sign up today for Sam’s FREE Daily Trader’s Alert!
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.
