Within seconds of Thursday’s opening, the Dow Industrials (DJI) gained more than 30 points and it looked like a stampede. But 20 minutes later, the Dow reversed course and headed south. After a modest bout of selling, the markets settled into a narrow band of trading and volume fell to an abnormally slow pace.
But by mid-afternoon, buying picked up among the technology stocks led by Google, up 2.4%, and Yahoo (YHOO) up 3%. After yesterday’s close, Google (GOOG) reported $5.16 versus an estimated $4.93 for Q1.
Hewlett-Packard (HPQ) jumped 5% on news that it had overtaken Dell (DELL) as the leading U.S. PC maker. By the close, the sector gained 2.4%. And even Nokia (NOK) was up 11% despite reporting a 90% drop in Q1 earnings.
Financials were strong again closing with the now familiar rush to buy in the last hour of trading. JPMorgan Chase (JPM) reported better-than-expected earnings and rose 2.1%, and Citigroup (C) was up 4 cents in anticipation of today’s earnings report. (Citigroup reported 18 cents versus an estimate of 34 cents.)
Lately, investors have been ignoring bad economic news and that happened again yesterday when housing starts for March were 30,000 units less than expected at 510,000. And building permits in March totaled 513,000 versus an expected 549,000. Initial jobless claims for the week ending April 11 were down despite gains in continuing claims which hit a new record of 6.02 million.
The Dow Jones Industrials (DJI) closed at 8,125 up 95 points, the S&P 500 (SPX) gained 13 points to end at 865, and the Nasdaq (NASD) rose 44 points to 1,670.
On the New York Stock Exchange, gainers were ahead by 4-to-1 on volume of 1.6 billion shares. The Nasdaq traded 794 million shares with advancers ahead by about 7-to-4.
The May crude oil contract rose 73 cents to $49.98 a barrel and the Amex Energy SPDR (XLE) gained 21 cents, closing at $45.25.
The June gold contract fell $13.70 to $879.80 an ounce ending below $880 for the first time since April 6. The PHLX Gold/Silver Index (XAU) fell $6.28 to $118.84.
What the Markets Are Saying
The major indices, led by the financial and technology stocks, drove to new intraday highs on all of the major indices yesterday despite internal indicators that are very overbought. But this condition, along with sentiment numbers that are in neutral territory, continues to confound technicians by the tenacity of the drive upward and the ability of the market to move ahead in the face of bad news.
Yesterday, the American Association of Individual Investor’s (AAII) Sentiment Survey showed that, although the public is becoming more bullish, their enthusiasm is not overdone with 44.14% bullish versus 35.86% bearish. And even though there are more bulls than bears, the numbers have been flopping back and forth since March 5 when bulls came in at 18.92%.
But Investors Intelligence reported a shift in insider buying that could hint of some trouble ahead. They report that, although insiders are still positive, there has been a slowing in their buying and the latest numbers have sellers and buyers almost equal.
Chart-wise, prices are getting within reach of the January closing high of S&P 500 (SPX) 934 but are entering the very thick zone of trading that occurred from October to February. Since it is unlikely that this range will be penetrated, we remain very cautious while keeping an eye out for good trading opportunities in the financial and technology sectors.
Today’s Trading Landscape
Earnings to be reported include: A.O. Smith Corp, Acme United, BB&T Corp, Citigroup, Duckwall-ALCO Stores, First Horizon National Corp, General Electric, Mattel, Media General, Preferred Bank, Prosperity Bancshares, Sinopec Shanghai Petrochemical Co Ltd, Student Loan, and Valmont.
The lone economic report due today is the Mid-April Reuters/Univ. Michigan Sentiment Index (the consensus expects 57.5).
Late news: General Electric (GE) reported 26 cents versus an estimate of 21 cents.
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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.
