The Fate of the Markets Rests on Earnings

Stocks opened lower on Monday as military action in the Middle East and Ukraine appeared likely to escalate. But the selling lacked volume and much of it was profit-taking following a strong day on Friday. By mid-morning, the lows of the day had been made, and the remainder of the session was controlled by bargain hunters.

Optimism was high among traders as the focus on earnings seemed to dominate trading. This week, 12 Dow industrials and 146 S&P 500 components are set to issue earnings, including Apple (AAPL), Microsoft (MSFT) and Ford (F). FactSet expects S&P 500 companies’ earnings to grow 5.1% in the quarter.

Every sector of the S&P 500 declined Monday except energy, which gained 0.2%. The gains resulted from the buying in major oil companies like Chevron (CVX) and ExxonMobil (XOM).

At Monday’s close, the Dow Jones Industrial Average fell 48 points to 17,052, the S&P 500 lost 5 points at 1,974, and the Nasdaq fell 7 points to 4,425. The NYSE primary market traded just 530 million shares with total volume of 2.6 billion shares, and the Nasdaq crossed 1.6 billion shares. Decliners outpaced advancers by 1.7-to-1 on both the Big Board and Nasdaq.

DJI Chart
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Chart Key

The Dow industrials are holding firm after three successive days of bouncing from the first line of support at 16,970. And even though MACD looks a bit shaky, the price action is positive.

SPX Chart
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Similarly, the S&P 500 held at its first line of support, despite its lows having penetrated the 20-day moving average on the past three days. And even though its MACD is in bearish territory, the overall price structure appears strong.


The major indices have held up during a very heavy barrage of negative geopolitical stress. As we approach the height of the quarterly earnings season, it appears obvious that the market is depending on solid earnings rather than anything else to support its recent strength. If earnings meet or exceed FactSet’s estimate of 5.1% growth, look for new highs.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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