The major indices closed higher again as the broad advance continued into its seventh consecutive day of gains for the Dow Jones Industrial Average (DJI) and the 10th straight day of gains for the Nasdaq (NASD) — its first such run in more than 12 years.
And this, was despite an off day for technology and financial stocks, which fell in advance of key earnings from Apple (AAPL) and Yahoo (YHOO) that were reported after the close.
The basis for the Dow advance was industrial giant Caterpillar (CAT), which handily beat Q2 earnings forecasts, and then went on raise its annual forecast. Strong earnings from Merck (MRK) helped, too.
Caterpillar’s spokesman said, “Credit markets have improved significantly. Fiscal policy and monetary stimulus have been introduced around the world, and we are seeing signs, particularly in China, that they are beginning to work. In addition, we’ve seen many key commodity prices increase from their lows in the first quarter, and they are holding in a range that is usually positive for investment.”
After a strong opening due to the Caterpillar announcement, stocks sagged until early afternoon as investors pondered the tough questions thrown at Fed Chairman Ben Bernanke and his even more complex answers during his Congressional appearance.
But more short-covering at the close added about 30 Dow points in the last 10 minutes of trading and almost erased the entire pullback that had followed the strong opening.
At the close, the Dow gained 68 points to 8,916, the S&P 500 (SPX) rose 3 points to 955, and the Nasdaq gained 7 points to 1,916.
The NYSE traded 1.2 billion shares with advancers ahead of decliners by about 4-to-3. On the Nasdaq, decliners were ahead by 7-to-5 with volume of 699 million shares.
>
August crude oil closed at $64.72 a barrel, up 74 cents, and the Energy Select Sector SPDR (XLE) gained 43 cents to $49.71, helped by the expiration of the August contract and better corporate earnings.
August gold fell $1.90 to $946.90 an ounce, and the PHLX Gold/Silver Index (XAU) lost $1.15, closing at $148.16.
What the Markets Are Saying
On July 21, I noted that the Nasdaq is the index to watch — and it continues to lead the current advance.
Yesterday it rallied again in the last minutes of trading, overcoming a gap opening, and closed very close to the high of the day, marking the 10th straight day of gains for the index. With that spectacular run the Nasdaq is now solidly within an area of resistance of 1,905 to 1,947.
And with yesterday’s strong close, our internal indicators are now very overbought. Nevertheless, they can become even more overbought as shorts continue to be ravaged and new money arrives from the enormous pool of money market reserves stashed away by the many who vowed “never to buy stocks again.”
S&P technician Chris Burba opined after yesterday’s close that “Nasdaq may be at a turning point following the rally off of the 7/8 low. The market is overbought and momentum is weakening. He also said that a “bearish reversal pattern of medium reliability” was given by his candlestick analysis.
Well, he may be correct, but until we see a solid reversal from the Nasdaq or the other key indices or indicators, we remain short-, medium- and long-term bullish. We will be buyers on any meaningful pullback.
>
Today’s Trading Landscape
Earnings to be reported include: Advanced Analogic Technologies, Affymetrix, Air Products and Chemicals, AirTran Holdings, Albemarle Corp., Alcon, Allegheny Technologies, Allegiant Travel Co., Alliance Data, Altria Group, Ambassadors Group, Amdocs Ltd., Arkansas Best Corp., Astoria Financial Corp., ATMI, BancorpSouth, Bank of New York Mellon Corp., Boston Private Financial Holdings, Broadpoint Securities Group, C.R. Bard, Carlisle Companies, Chipotle Mexican Grill, Cirrus Logic, Citrix Systems, ClickSoftware Technologies Ltd., Cohu, Community Bank System, Conceptus, Core Laboratories, CoStar Group, Covanta Holding Corp., Cullen/Frost Bankers, Cymer, Delta Air Lines, Domino’s, DST Systems, eBay, Eli Lilly, Encore Wire, Endologix, Energen, Entegris, Equifax, Equinix, Exponent, FICO, First Midwest Bancorp, Gentex, Genzyme Corp, GlaxoSmithKline, Glimcher Realty Trust, Graco, Host Hotels & Resorts, Hub Group, Hubbell, ICON plc, iGate Corp., Illinois Tool Works, Imation Corp., Intersil Corp., Intuitive Surgical, iRobot Corp., Jarden Corp., KeyCorp., Knight Capital Group, Knight Transportation, Landry’s Restaurants, LaSalle Hotel Properties, Lennox International, Logitech International, Media General, Mellanox Technologies Ltd., MKS Instruments, Morgan Stanley, MTS Systems, Navigant Consulting, Netgear, Noble Corp. Baar, Northern Trust, NVE Corp., Old Dominion Freight Line, Omniture, OSI Pharmaceuticals, Overstock.com, P.F. Chang’s China Bistro, Pacific Continental Corp., PepsiCo, Pfizer, Piper Jaffray, Precision Drilling Trust, PSS World Medical, Qualcomm, Quidel Corp, Ramco-Gershenson Properties Trust, Range Resources, Richardson Electronics, Rimage Corp, S.Y. Bancorp, SanDisk Corp., Sanmina-SCI Corp., SI Financial Group, Silgan Holdings, Skechers USA, Skyworks, Span-America Medical Systems, St. Jude Medical, Steel Dynamics, Suncor Energy, SunTrust, Susquehanna Bancshares, TCF Financial Corp., Teck Resources Ltd., Telefonos De Mexico, Terex Corp., Texas Capital Bancshares, The Boeing Co., The Mosaic Co., The Stanley Works, Tompkins Financial Corp, Tractor Supply Co., TriQuint Semiconductor, TrueBlue, Tupperware Brands, U.S. Bancorp, UMB Financial, USG, Vascular Solutions, VMware, Walter Energy, Whirlpool Corp., Wipro Ltd., Young Innovations and Zenith National Insurance Corp.
Economic reports due: MBA purchase applications and EIA Petroleum Status Report.
Late news: Apple reported Q3 earnings of $1.35 per share versus an estimated $1.17. Starbucks reported Q3 EPS of 24 cents versus a 19-cent estimate. SunTrust reported Q2 EPS of 41 cents versus a 52-cent estimate. Whirlpool reported $1.04 versus 51-cent estimate. Yahoo reported 10 cents versus an 8-cent estimate. Advanced Micro Devices reported 65 cents versus a 53-cent estimate. Eli Lilly reported $1.12 versus a $1.02 estimate. Pfizer reported 48 cents versus a 47-cent estimate. Altria reported 50 cents versus a 47-cent estimate. PepsiCo reported $1.06 versus a $1 estimate. Boeing reported $1.41 versus a $1.21 estimate. US Bancorp reported 12 cents versus a 10-cent estimate.
Get Sam Collins’ Daily Trader’s Alert e-mailed to you each morning before the opening bell absolutely FREE!
In addition to getting instant access to his Daily Market Outlook, you’ll also receive his Trade of the Day in the same e-mail so you can start your day off right by positioning yourself for profits!
Sign up today for Sam’s FREE Daily Trader’s Alert today!
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 his most recent market outlooks.
