The Dow’s (DJI) seven-day winning streak came to an end yesterday, as fatigue seemed to overcome blue-chip buyers. But other buyers were still chasing technology stocks, and that drove the Nasdaq (NASD) to its 11th straight winning session.
The Nasdaq was the beneficiary of Apple’s (AAPL) powerful earnings report, which propelled the stock to another new high for the year. (See why AAPL is one of the 6 Tech Stocks to Own Now.)
And, despite an earnings miss, even Yahoo (YHOO) gained 3.7%.
In these stressful times it seems that folks drink expensive coffee, and more of it. At least that’s what Starbuck’s (SBUX) earnings are telling us. The coffee retailer reported Q3 earnings that caught analysts by surprise. Then management surprised them again by raising Q4 and full-year guidance. The stock vaulted to gain of 18.38%.
Banks took it on the chin again with Wells Fargo (WFC) off 5.52%, despite better-than-expected earnings, and Bank of New York Mellon (BK) fell 7.73% following a 43% drop in earnings.
The Wells Fargo drop and Boeing (BA) being off of 2.37% made for a difficult day for the Dow, which closed lower by 35 points to 8,881. The S&P 500 (SPX) fell less than a point to close at 954, and the Nasdaq gained 10 points, closing at 1,926.
Volume was light on the NYSE with just over 1 billion shares traded, but advancers were ahead of decliners by 4-to-3. The Nasdaq traded 719 million shares with advancers ahead by 3-to-2.
September crude oil fell 21 cents to $65.40 a barrel on reports of increases in inventories. The Energy Select Sector SPDR (XLE) fell 45 cents to $49.26.
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August gold rose $6.40 to $953.30 an ounce due to another round of weakness in the U.S. dollar. The PHLX Gold/Silver Index (XAU) closed at $148.14, off 2 cents.
What the Markets Are Saying
After rising for six of seven days, the S&P 500 made a new intraday high and then succumbed to profit-taking, closing on a small minus, which was still above the recently penetrated resistance zone’s upper limit of 950.
On July 21, the S&P closed at a new high for the year and now appears to be embarking on a new leg with a near-term target of 1,000, as well as a longer-term target of 1,200, which could be achieved before the end of the year.
Meanwhile, the Nasdaq roared to its 11th straight day of advances despite an extremely overbought series of internal indicators. The Nasdaq is the leading index, and yesterday it reasserted that leadership by not only closing 10 points higher, but doing it with an upside volume versus downside volume ratio of over 2-to-1 while the other indices registered small losses.
One of the most remarkable statistics on the Nasdaq is its six-day summary of advancing volume versus declining volume, which is 3.45 to 1, making it “the highest in at least 10 years,” according to the S&P. It is this ratio that most clearly points out the power of the current run. This volume ratio this high is not easily reversed.
Conclusion: Despite an overbought condition — as measured by the internal indicators — and the likelihood of a minor round of profit-taking, the market is now working on a major breakout.
While we have been focused on the Nasdaq, we should now turn our attention to the S&P 500. A close above its prior high of 956.23 would signal that a major market breakout is about to occur.
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Today’s Trading Landscape
Earnings to be reported include: 3M Co., A.T. Cross Co, ABB, ACC Ltd., Advanced Energy Industries, Airgas, Alaska Airlines, Alexion Pharmaceuticals, Align Technology, Amazon.com, American Express, Ameriprise Financial, AmSurg, Arch Capital Group, AT&T, Avid Technology, Avocent Corp., Baidu, Ball Corp, BJ’s Restaurants, Bristol-Myers Squibb, Broadcom, Bucyrus International, Builders FirstSource, Bunge Ltd., Burlington Northern Santa Fe Corp., CA, Cabot Microelectronics, Cabot Oil & Gas Corp., Capital One Financial Corp., Cash America International, CE Franklin Ltd., Celestica, Celgene Corp., Century Aluminum, Chicago Mercantile Exchange Holdings, China Bak Battery, Chubb Corp., CIT Group, City National Corp., Colonial Properties Trust, Computer Programs and Systems, Compuware Corp., Con-Way, Cooper Industries Ltd., Credit Suisse Group, Danaher, Danvers Bancorp, Deckers Outdoor, Deluxe Corp., Developers Diversified Realty Co., Diamond Offshore Drilling, Dice Holdings, Digi Internationl, DSP Group, Eagle Materials, Eastman Chemical Co., Electro Scientific Industries, EMC Corp., EMC Insurance Group, Empire District Electric, EnCana Corp., Ensco International, EZCORP, F.N.B. Corp., Federated Investors, Fifth Third Bancorp, Financial Institutions, First Commonwealth Financial, First Financial Bankshares, First Security Group, Ford Motor Co., Gardner Denver, GATX Corp., Glacier Bancorp, Global Payments, Goodrich Corp., Gulf Island Fabrication, Healthways, Hercules Offshore, Hittite Microwave Corp., HNI Corp., Huntington Bancshares, Immucor, IMS Health, Independent Bank Corp., Informatica, Insituform Technologies, Interactive Brokers Group, Interactive Data Corp., International Game Technology, Interphase, Invacare, Iteris, ITT Educational Services, J&J Snack Foods, JetBlue Airways, Juniper Networks, Kimberly-Clark, KLA-Tencor, Korea Electric Power, L-3 Communications Holdings, Laboratory Corporation of America, Leggett & Platt, Life Time Fitness, Manpower, Matthews International, McDonald’s Corp., Mead Johnson Nutrition Co., MEMC Electronic Materials, Metavante Technologies, Mettler-Toledo International, Micrel Semiconductor, Microsemi, Microsoft, Minerals Technologies, Monro Muffler Brake, Myers Industries, Nara Bancorp, National Instruments, National Penn Bancshares, NCR Corp., Netflix, NetScout Systems, Newmont Mining Corp., Nii Holdings, Northrop Grumman, NSTAR, Nucor, NuVasive, Occidental Petroleum Corp, OceanFirst Financial, Old Republic International, Omnicell, Omnicom Group, PC-Tel, Performance Technologies, Philip Morris International, PMC-Sierra, PNC Financial Services Group, Pool Corp., Potash, Premiere Global Services, ProLogis, Provident Financial Services, Rambus, Reliance Steel & Aluminum Co., RF Micro Devices, Riverbed Technology, Ryder System, Safeway, Saint Gobain SA, Sandy Spring Bancorp, Scholastic, Seattle Genetics, Sigma-Aldrich Corp., Solarwinds, SonicWall, Spartan Motors, Spectranetics, Standard Pacific Corp, Starent Networks Corp., Starwood Hotels & Resorts, STMicroelectronics, SunPower Corp., SVB Financial Group, Synovus Financial Corp., Taubman Centers, Teledyne Technologies, Temple-Inland, Terra Industries, Terra Nitrogen, The Bancorp, The Cheesecake Factory, The Hershey Co., Thermo Fisher Scientific, TradeStation Group, Ultratech, Union Pacific, United Parcel Service, US Airways, Valley National Bancorp, VASCO Data Security International, VCA Antech, Vitran Corp., W.R. Grace & Co, Washington Banking Co., Washington Real Estate Investment Trust, Watsco, WESCO International, Western Alliance Bancorp, Westwood Holdings Group, Whitney Holding Corp., Woodward, Wyeth, Xerox Corp, Zimmer Holdings and Zoll Medical.
Economic reports due: Jobless claims (the consensus expects 560,000), existing home sales (the consensus expects 4.85 million), and EIA Natural Gas Report.
Late News: eBay (EBAY) reported Q2 earnings per share of 37 cents versus an estimated 36 cents. Sandisk (SNDK) reported 36 cents versus an estimated 16 cents. Qualcomm (QCOM) reported 54 cents versus an estimated 52 cents. Starwood HOtes & Resorts (HOT) reported 22 cents versus an estimated 17 cents. Ford (F) reported 21 cents versus an estimated 48 cents. Raytheon (RTN) reported $1.24 versus an estimated $1.13. Hershey (HSY) reported 43 cents versus an estimated 35 cents. 3M (MMM) reported $1.20 versus an estimated 94 cents. AT&T (T) reported 54 cents versus an estimated 51 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 his most recent market outlooks.
