The Commerce Department announced early yesterday that Q1 GDP fell at an annual rate of 6.1%, compared to an expected rate of 4.7%. But despite the shortfall stocks rallied early and then flattened off until the main event of the day — the Federal Open Market Committee (FOMC) decision on interest rates.
As expected, the FMOC decided to keep the interbank lending rate at near zero and pledged to keep rates “exceptionally low” for an extended period. Along with the rate decision the governors reported “a modest upgrade to the economic outlook, and [confirmation] that consumer spending is stabilizing.”
At first, the market didn’t seem to know what to do and swung wildly within a 100-point range for almost 30 minutes, flattened, and then fell. But just before the close, a buy program hit the New York Stock Exchange that drove the index up almost 50 points in the last several minutes of trading.
Financials again turned in the best performance, up 4.8%. Bank stocks gained 3.7% despite a report from Bloomberg.com that at least six of the 19 largest banks may require additional capital. But the spotlight will likely switch to earnings since more than 150 companies are expected to report their latest results this morning.
At the close the Dow Jones Industrial Average (DJI) gained 169 points to 8,186, the S&P 500 (SPX) rose 18 points to 874, and the Nasdaq (NASD) gained 38 points to close at 1,712.
The NYSE traded 1.5 billion shares with advancers ahead of decliners by about 6-to-1. On the Nasdaq, 795 million shares changed hands with advancers ahead by about 5-to-1.
Crude oil for June delivery rose $1.05 to close at $50.97 a barrel due to an unexpected drop in gasoline inventories. The Amex Energy SPDR (XLE) closed at $46.55, up $1.25.
The June gold contract gained $6.90, closing at $900.05 an ounce, and the PHLX Gold/Silver Index (XAU) gained $3.28 to $122.66.
What the Markets Are Saying
With the major averages now deeply into the thick area of resistance formed between October and January, we will shortly know whether or not a rally that has lasted for seven weeks is merely a rally in a bear market or the beginning of a new bull market.
Even with bad economic news announced early in yesterday’s session, a tepid forecast from the Fed, and indications that the Feds will have to come up with more cash to bail out the biggest banks — stocks rallied. Then they rallied again on the Fed announcement of no rate change, went flat, and then down before a last-minute rally put a halt to some serious selling.
In fact, from the high of the rally following the Fed’s continuation of zero-interest rates, the Dow (DJI) fell more than 120 points. So, despite the initial rally, in the face of bad news, when the big news from the Fed hit, stocks folded.
And so at the end of a wild day on Broad and Wall Streets, we are still not sure which way stocks will head. But if the S&P 500 (SPX) is able to surmount the resistance at 875 to 900 and then attack the January high at 943.85, it will be hard to argue that the bear is not back in his den.
However, our technical indicators are now grossly overbought and the sentiment numbers are far too optimistic, with the exception of the CBOE Volatility Index (VIX), which is still under 40.
I, therefore, continue to caution against getting too bullish since the market’s charts and underlying technical indicators still are biased toward a correction. Caution is still king and so is cash. If I am wrong, there will be plenty of time to make money on the long side.
Today’s Trading Landscape
Earnings to be reported include: 1-800-Flowers.com, Acme Packet, Affiliated Computer Services, Agree Realty, Airvana, Alaska Communications Systems Group, Alexander & Baldwin, Alliant Energy, Aluminum Corp of China Ltd, AMAG Pharmaceuticals, Anaren, Annaly Capital Management, Apache Corp, APCapital, Applied Micro Circuits Corp, Ariba, Armstrong World Industries, Art Technology Group, Ashland, Aspen Insurance Holdings Ltd, Asset Acceptance Capital Corp, Assisted Living Concepts, AstraZeneca PLC, Athenahealth and Atmos Energy Corp.
Baldwin & Lyons A, Belo, Berry Petroleum Co, Big 5 Sporting Goods Corp, BioMarin Pharmaceutical, BioScrip, Black Hills Corp, Blackbaud, BorgWarner, Brasil Telecom S.A., Bruker Corp, Brunswick Corp, Brush Engineered Materials, Buckeye GP Holdings LP, Buckeye Partners and Build A Bear Workshop.
Cabela’s, Cache, Callaway Golf, Callidus Software, Camden Property Trust, Canon, Capella Education Co, Capital Products Partners LP, Capstead Mortgage Corp, CARBO Ceramics, Cardinal Health, Cardtronics, Cbeyond, CBIZ, CDI Corp, CEC Entertainment, Celgene Corp, Central Pacific Financial Corp, CenturyTel, Chart Industries, China Security & Surveillance Tech, Chiquita Brands Int’l Choice Hotels Int’l, Cigna, Cincinnati Financial Corp, CMS Energy Corp, Colgate-Palmolive, Comfort Systems USA, Compellent Technologies, Comscore, Comsys IT Partners, Controladora Comercial Mexicana, S.A. de C.V., Corinthian Colleges, Covidien Ltd, CryoLife, Cummins and Curtiss-Wright Corp.
Deltek, Dentsply Int’l, Deutsche Lufthansa, Digital Realty Trust, Dolby Laboratories, Dominion Resources, Domino’s, Dover Downs Gaming and Entertainment, Dover Motorsports and Dynamic Materials.
Eastman Kodak Co, Embraer-Empresa Brasileira de Aeronautica S.A., Enbridge Energy Management, Enbridge Energy Partners LP, EnPro Industries, EQT Corp, Equity Residential, eResearch Technology, Erie Indemnity, Ethan Allen Interiors, Evercore Partners, Evergreen Solar, Expedia, ExxonMobil Corp, Femsa, First Industrial Realty Trust, Fiserv, Forrester Research and Fujifilm Holdings Corp.
General Cable Corp, Genesis Lease Ltd, Genoptix, Gen-Probe, Gentiva Health Services, GFI Group, GrafTech Int’l Ltd, Great Southern Bancorp, Grupo Casa Saba S.A. de C.V., Hartford Financial Services, HealthSpring, Helmerich & Payne, Hornbeck Offshore Services and Huron Consulting Group.
ICT Group, ImmunoGen, Imperial Oil Ltd, Infinity Property and Casualty Corp, Ingram Micro, IntegraMed America, Integrated Device Technology, Integrys Energy Group, Intermec, InterMune, International Flavors & Fragrances, Int’l Paper Co, Investment Technology Group, Investors Bancorp, Iowa Telecommunications Services, Iron Mountain and iStar Financial.
Kansas City Southern, KBR, Kellogg Co, Key Technology, Kimco Realty Corp, LaBarge, Lancaster Colony Corp, LaserCard Corp, LIN TV Corp, Liquidity Services, Littelfuse, LKQ Corp, LNB Bancorp, LoJack, Lubrizol and Lydall.
M/I Homes, Mac-Gray Corp, Mack-Cali Realty Corp, Magellan Health Services, Manitowoc, Marathon Oil Corp, Martha Stewart Living Omnimedia, Maxim Integrated Products, MB Financial, McAfee, Medarex, MetLife, Mettler-Toledo Int’l, MFA Financial, Micros Systems, Mine Safety Appliances, MIPS Technologies, Monster Worldwide, Morningstar, Motorola, MWI Veterinary Supply and Mylan.
National Fuel Gas Co, National Technical Systems, Natus Medical, NetScout Systems, Neutral Tandem, Newell Rubbermaid, Newmont Mining Corp, Newpark Resources, Nobel Learning Communities, Noble Energy, Northeast Utilities, Novamed, Novo Nordisk A/S, NRG Energy, NSTAR, Ntelos Holdings Corp, Nu Skin, NuStar Energy LP and NYSE Euronext.
Odyssey Re Holdings Corp, OfficeMax, Omnicare, Omnicell, On Assignment, On2 Technologies, Online Resources Corp, Oshkosh Corp, OSI Systems, Osteotech, Owens Corning, Pacific Capital Bancorp, Palomar Medical Technologies, Park Electrochemical, Patriot Coal Corp, Patterson-UTI Energy, PC Connection, PC-Tel, Pennsylvania Real Estate Investment Trust, PerkinElmer, PharMerica Corp, Pride Int’l, Procter & Gamble Co and QLogic.
Radiant Systems, Rayonier, Reddy Ice, Regal Entertainment Group, Reliv Int’l, Revlon, Rochester Medical Corp, Ruddick Corp, S1 Corp, Safeway, Sally Beauty Co, Scientific Learning, Sierra Wireless, Silgan Holdings, Simpson Manufacturing, SK Telecom, Smith & Nephew, Soapstone Networks, Sourcefire, Spirit AeroSystems Holdings, Starwood Hotels & Resorts, Stewart Information Services, Strattec Security Corp, Strayer Education and Successfactors.
Taiwan Semiconductor Manufacturing Co Ltd, TC PipeLines LP, Techwell, Tele Norte Celular Participacoes S.A. (Amazonia), TeleCommunication Systems, Telefon AB LM Ericsson, Telemar, Tenneco, Tessco, Tessera Technologies, The Dow Chemical Co, The First American Corp, The GEO Group, The Laclede Group, The Timberland Co, The Travelers Companies, Transatlantic Holdings, Transcend Services, Trex Co, Triumph Group, TTM Technologies and Tyco Int’l.
UGI, Ultralife Corp, Unica Corp, Unifi, Union Drilling, United Stationers, Valassis Communications, Varian Semiconductor Equipment Associates, Viacom, VistaPrint, Vitro S.A.B. de C.V., Volcom, Watson Pharmaceuticals, Wayside Technology Group, West Bancorporation, West Marine, West Pharmaceutical Services, Williams Companies, Williams Partners LP, Williams Pipeline Partners LP, Winland Electronics, Xcel Energy, and Zygo.
Several economic reports are due today including Q1 Employment Cost Index (the consensus expects a 0.5% increase), initial jobless claims for the week of April 25 (the consensus expects an increase of 5,000), March Personal Income (the consensus expects negative 0.2%), March Personal Spending (the consensus expects negative 0.1%), the adjusted April Chicago Purchasing Managers Index, or PM (the consensus expects 34.5), DJ-BTMU Business Barometer for April 11, and EIA Natural Gas Inventories.
The following earnings were reported: Motorola (MOT) came in with 13 cents versus the estimated 11 cents, Viacom reported 29 cents versus an estimated 26 cents, Procter & Gamble’s (PG) Q3 figure was 84 cents versus an expected 80 cents, Dow Chemical (DOW) disappointed with 12 cents versus an expected 21 cents, Eastman Kodak (EK) suspended dividend. The Wall Street Journal reported that a Chrysler bankruptcy is imminent.
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