Despite a report that advance retail sales for December had decreased 3% where an increase of 5% was expected, yesterday stocks rose again to new 52-week highs.
The disappointing retail numbers, coupled with yesterday’s increase in jobless claims, are indications that the economic recovery may be faltering. And even though some point out that the jobless number was balanced by a larger-than-expected drop in continuing claims, the lower continuing claims number is due to the expiration of jobless benefits.
Technology stocks came to life in anticipation of earnings from Intel (INTC) that were reported after the close. And regional banks rose 2.4%, which helped the financials to a gain of 0.6%.
But telecoms continued to be weak with AT&T (T) and Verizon (VZ) closing lower. Telecommunications fell 1.8%, making it the the worst performing group of the year, now off 5.1%.
At the close, the Dow Jones Industrial Average (DJI) had gained 30 points to 10,710, the S&P 500 (SPX) rose 3 points to 1,148, and the Nasdaq (NASD) rose 9 points to 2,317.
Volume was again very low with the NYSE trading just 888 million shares. Advancers on the Big Board exceeded decliners by 5-to-4.
On the Nasdaq, advancers were ahead by 3-to-2 on volume of 648 million shares.
February crude oil fell 26 cents to $79.39 a barrel, but the Energy Select Sector SPDR (XLE) rose 17 cents to $59.74.
Gold for January delivery gained $6.20 to $1,142.60 an ounce. The PHLX Gold/Silver Sector Index (XAU) fell $1.52 to $176.40.
What the Markets Are Saying
If you have been following this report, you have read many times that when a market rises against bad news it may seem irrational but, in fact, it confirms that a powerful bull market is on the move. And yesterday the stock market moved modestly higher on some very nasty news.
From the disappointment of lower retail sales, and the pain of higher unemployment, plus the horror of disaster in Haiti, just 750 miles from our shores, it seems there is little to be cheerful about.
Stocks by most technical measures, whether it be the internal indicators of Moving Average Convergence/Divergence (MACD), stochastic or momentum, or the sentiment numbers represented by AAII (now showing that bulls are at 47.44% versus bears at just 26.92%), all say that the market is overbought. Yet stocks continue to rise and rise. In the face of the disbelief of most analysts, the market continues to climb the “wall of worry” as if it were just a picket fence.
Why? Because of the anticipation of much better earnings this year than last. I touched on it yesterday when I noted that the S&P was estimating a three-fold increase in earnings for all of 2010 versus 2009. Note how Intel rose 2.48% just on the anticipation of better earnings, which were reported after the close.
Yes, the market is overbought. But if Intel’s results are but a prelude to similar increases from other big techs, then the market will continue to rise.
However, nothing goes up forever, so traders should be content with a reasonable profit and not push for the last dime.
Intel beat analysts’ estimates of 30 cents for Q4 by a third. Not all reports will be so rosy. When the first real disappointment hits, traders will rush for the exits — don’t be one of them. Bulls make money … you know the rest.
Today’s Trading Landscape
Economic reports due: consumer price index (the consensus expects 0.1%, and 0.1% ex-food and energy), Empire State Manufacturing Survey (the consensus expects 13.0), industrial production (the consensus expects 0.6% for production and a 71.9% for the capacity utilization rate), and consumer sentiment (the consensus expects 74).
Late news: JPMorgan Chase (JPM) reports Q4 earnings of 74 cents, beating analysts’ estimates of 61 cents.
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