Yesterday marked the fourth day of advances for the S&P 500 (SPX), the NYSE Composite (NYA) and Nasdaq (NASD) and resulted from the possibility that the government will purchase risky assets from existing banks and hold them in one collective “bad bank.”
And again, as might be expected, the financial stocks led the rally, gaining 13%.
Wells Fargo (WFC) was the biggest winner on Wednesday, up 31%, but other big-name banks advanced too. Bank of America (BAC) gained 14%, Citigroup (C) gained 19% and U.S. Bancorp (USB) was up 12%.
WFC’s bigger gain was due to an earnings gain of 41 cents (after exclusions) vs. an expected gain of 33 cents. The bank also said that it doesn’t plan to accept any TARP funds and plans to maintain its dividend.
In the first trading session of the year, the Federal Open Market Committee decided to leave interest rates unchanged. It went on to say that it plans to support financial markets through open-market operations and other measures.
At the close yesterday, the Dow Jones Industrial Average (INDU) gained 201 points, closing at 8,375. The S&P 500 gained 28 to end the day at 874, and the Nasdaq rose 53 to close at 1,558.
The NYSE traded 1.5 billion shares, with advancers ahead of decliners by 4-to-1, and the Nasdaq traded 820 million shares with advancers ahead by 5-to-2.
The March crude oil contract closed at $42.16 a barrel, up 58 cents, with the Amex Energy SPDR (XLE) gaining $1.31 to end the day at $49.32. February gold futures fell $3.80 to $884.40 per troy ounce. The PHLX Gold/Silver Index (XAU) closed at $120.52, off $1.91.
What the Markets Are Saying
Stocks advanced for the fourth day for their best-sustained performance this year, but as I read the after-market reports, you would think that the apocalypse was just around the corner. There were comments like “no evidence to support that view,” referring to world banks’ success in reviving economies.
Or how about, “The bottom line is, earnings are dwindling. And it’s a lot worse than it looks, when you look year-to-year.” Or, “Obviously the news background is favorable today, but this is just another rally in a bear market.”
With all of the gloom and doom, here are a few facts to ponder:
- The Dow rose by more than 200 points yesterday with three key indices having the best run-up since the five days that began on Nov. 21.
- Yesterday’s buying was very broad, with a better than 4-to-1 ratio of advancers to decliners.
- Two major indices, the S&P 500 and the Nasdaq, closed above their 20- and 50-day moving averages — a positive chart signal.
Could it possibly be that the market has turned and is beginning to climb the “Wall of Worry” that is characteristic of young bull markets?
It is a bit early to say that the new bull has arrived, but the last two weeks have provided enough evidence for investors to begin to very carefully purchase small key positions in stocks that cry “value.”
Today’s Trading Landscape
Earnings to be reported include:
3M Co., 3PAR, 8×8, Abaxis, Accuray, Acxiom, Affiliated Computer Services, Alaska Airlines, Alliant Techsystems, Altria Group, Amazon.com, AMB Property Corp, American Electric Power, AmeriCredit Corp, Anaren, Appalachian Bancshares, Applied Micro Circuits Corp, Arctic Cat, Ariba, Arkansas Best Corp, AstraZeneca PLC, Autoliv, AutoNation, Avid Technology, Ball Corp, Banco de Chile, Bancorp Rhode Island, Black & Decker Corp, Broadcom, Brunswick Corp. and Bryn Mawr Bank.
Also on the docket are C.R. Bard, CA, Cadence Financial Corp, California Micro Devices Corp, Capitol Bancorp, Capstead Mortgage Corp, Caraco Pharmaceutical Labs Ltd, Cardica, Cash America Int’l, CE Franklin Ltd, Celgene Corp, Cemex S.A.B. de C.V., Center Financial Corp California, Central Pacific Financial Corp, Chattem, Chubb Corp, Colgate-Palmolive, Columbia Banking System, Columbia Sportswear, Computer Programs and Systems, Conexant Systems, Consol Energy, Continental Airlines, Cybersource Corp, Cytec Industries, Data Domain, Digital River, Dionex, Dollar Financial Corp. and Dominion Resources.
Also look for Eastman Chemical Co., Electro Scientific Industries, Electronics for Imaging, Equitable Resources, Ethan Allen Interiors, Exar, Fairchild Semiconductor Int’l, First Community Bancshares, First Niagara Financial Group, First Security Group, Firstbank Corp Michigan, Flagstar Bancorp, Fortune Brands, Freescale Semiconductor, Frontier Financial, Gentex, Glacier Bancorp, Gold Fields Ltd, Harmonic, Harsco Corp, Helmerich & Payne, Horizon Financial, Hub Group, Illinois Tool Works, ImmunoGen, Infinera Corp, Informatica, Integrated Device Technology, Interactive Intelligence, International Speedway, Invacare, Investment Technology Group and Iteris.
We’ll also hear from JetBlue Airways, Juniper Networks, Kennametal, Key Technology, Key Tronic Corp, KLA-Tencor, K-Sea Transportation Partners L.P., Kyocera Corp, L-3 Communications Holdings, Lancaster Colony Corp, LaserCard Corp, Lear Corp, Legacy Bancorp, LNB Bancorp, Maxim Integrated Products, MBT Financial Corp, Media General, Medical Properties Trust, MetroCorp Bancshares, Micrel Semiconductor, Microchip Technology, Monster Worldwide, National Instruments, National Penn Bancshares, Newell Rubbermaid, Nidec, Nova Chemicals and Novo Nordisk A/S.
Plus, we have Occidental Petroleum Corp, Old Dominion Freight Line, Omnicell, Oplink Communications, optionsXpress Holdings, Oshkosh Corp, OSI Systems, PAB Bankshares, Pacific Capital Bancorp, PerkinElmer, Petro-Canada, Pixelworks, PMC-Sierra, Polaris Industries, Provident Financial Holdings, Provident Financial Services, Quantum Corp, Quixote, Rambus, Raytheon, Renaissance Learning, Riverview Bancorp, Royal Caribbean Cruises Ltd, Ruddick Corp, Sandy Spring Bancorp, SEI, Signature Bank New York NY, Smith Int’l, Sony Corp, Standex Int’l Corp, Stanley, Starent Networks Corp, Starwood Hotels& Resorts, Sterling Bancshares Strattec Security Corp. and SunPower Corp.
Additionally, there’s T. Rowe Price, Taylor Capital Group, Tessco, Textron, The Laclede Group, The Timken Corp, Tollgrade Communications, Transalta Corp, Transatlantic Holdings, Transcend Services, Triumph Group, Ultratech, Umpqua Holdings Corp, Under Armour, Universal Stainless & Alloy Products, UQM Technologies, US Airways and USA Truck.
Finally, we’ll get numbers from Varian Medical Systems, Varian Semiconductor Equipment Associates, Virginia Commerce, Wayside Technology Group, WESCO Int’l, Western Alliance Bancorp, WMS Industries, Xcel Energy, Zenith National Insurance Corp, Zimmer Holdings and Zygo.
Economic reports due today include: Initial Jobless Claims for the week of Jan. 24, December Durable Goods Orders, DJ-BTMU Business Barometer for Jan. 16, December New Home Sales, and EIA Natural Gas Inventories.
The following notable earnings have come in: Lilly (LLY) Q4 $1.07 vs. $1.05 est., Eastman Kodak (EK) Q4 ($0.51) vs. $1.05 est., Ford (F) Q4 ($1.36) vs. ($1.30) est., Colgate (CL) Q4 $1 vs. $0.98 est., International Paper (IP) $0.21 vs. $0.21.
In addition to earnings, Ford said that it does not plan to draw from the government’s plan and has reduced cash burn vs. the last quarter.
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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.
