A combination of strong earnings from a big-cap technology stock and a pair of positive economic reports resulted in a broad-based rally yesterday that took all 30 of the Dow’s components higher.
Cisco’s (CSCO) better-than-expected earnings reported after the close Wednesday was the catalyst for a strong opening in the technology sector that swept almost all large-cap techs along with it. In addition to reporting earnings that beat estimates, Cisco said that its outlook is solid and it authorized an additional $10 billion for its share repurchase plan. The large-cap tech explosion gave the Nasdaq (NASD) its best day since July.
Data from the International Council of Shopping Centers and Goldman Sachs showed that retailers had a gain in sales for the secondstraight month in October. And early yesterday investors were treated to news showing a weekly decline in jobless claims with non-farm productivity surging 9.5%. It marked the largest gain in productivity since 2003 and set the stage for a positive jobs report today.
At the close, the Dow Jones Industrial Average (DJI) was up 204 points to 10,006, the S&P 500 (SPX) gained 20 points to 1,067, and Nasdaq rose 50 points to 2,105.
Volume on the NYSE totaled 1.3 billion shares with advancers ahead of decliners by 5-to-1.
Nasdaq traded 734 million shares and advancers there were ahead by 4-to-1.
December crude oil fell 78 cents to $79.62, and the Energy Select Sector SPDR (XLE) rose 96 cents to $57.23.
Gold for December delivery rose $2 to $1,089.30 an ounce in choppy trading, and the PHLX Gold/Silver Index (XAU) closed at $170.71 for a gain of $1.04.
What the Markets Are Saying
Thursday’s dramatic acceleration, coupled with a “key reversal day” on both the S&P 500 and the Nasdaq on Monday, leads me to say the following:
Chartwise what we have on Nasdaq is a new two-point support line with the July 8 low connecting with Monday’s key reversal day intraday low of 2,024. (See the S&P and Nasdaq’s chart here.)
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Nasdaq’s internal indicators have suddenly reversed, issuing a buy signal from its slow stochastic, while its Relative Strength Index (RSI) is now rising after hitting 37.56 last week — the lowest reading for RSI since the bottom in March.
In brief then, the charts are bullish for both indices. And the sentiment readings are bullish, as well, with the American Association of Individual Investors (AAII) sentiment survey this week at 22.22% bullish and 55.56% bearish. This is the most bearish reading since Feb. 19, just before the March bottom, and insider selling has fallen sharply in the last week, according to Investors Intelligence.
Conclusion: The bull is alive and well and, barring a sharp closing low under the intermediate support lines of the key indices, could reach the intermediate target of S&P 1,120 and, perhaps, even Nasdaq’s goal of 2,300 before year-end.
Today’s Trading Landscape
Earnings to be reported include: A.C. Moore Arts & Crafts, Aceto, Aercap Holdings N.V., Aircastle Ltd., Arbor Realty Trust, Avantair, Breitburn Energy Partners L.P., Brigham Exploration Co., Bronco Drilling Co., Brookfield Asset Management, Central Vermont Public Service, Constellation Energy Partners LLC, Crosstex Energy, Crosstex Energy L.P., Dolan Media Co., Edison International, Exide, ExiService Holdings, Fortress investment Group LLC, FreightCar America, Furmanite Corp., General Steel Holdings, Gran Tierra Energy, Greatbatch, Hooper Holmes, Inhibitex, K12, Kingsway Financial Services, Kite Realty Group Trust, Knology, LifePoint Hospitals, Lollands Bank A/S, Mediacom Communications Corp., Medical Action Industries, Mirant, NeurogesX, Novavax, Par Pharmaceutical Companies, Perot Systems, Scripps Networks Interactive, Smith & Nephew, Spectra Energy Partners L.P., Suncor Energy, Superior Industries, TC PipeLines L.P., The Blackstone Group, and U.S. Global Investors.
Economic reports due: non-farm payrolls (the consensus expects -175,000), unemployment (the consensus expects 9.9%), wholesale trade and consumer credit (the consensus expects -$10 billion).
Late news: AIG (AIG) reported Q3 EPS ex-items of $2.85 versus a $1.20 estimate.
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