Despite strong gains in China, a smaller-than-expected loss of jobs in the ADP employment report, and a positive January ISM services index, stocks closed mixed-to-lower yesterday on light volume. Instead the focus was on an earnings miss by Dow component Pfizer (PFE), which seemed to upset the markets.
Pfizer was the weakest component on the Dow yesterday, off 2.3%, after announcing lower-than-expected Q4 profits and making a disappointing forecast for the remainder of this year.
What is troubling many observers is the lack of top-line growth. Even though more than three-quarters of the S&P 500 (SPX) companies have beaten expectations, only 30% of those reported that revenues had increased.
After two days of big gains, buyers stayed on the sidelines throughout the session. And sellers dominated the financial sector, taking it down 1.4%. But Aflac (AFL) and MetLife (MET) both had strong earnings, yet Aflac rose and MetLife fell.
The U.S. dollar gained against the euro and the yen.
At the close, the Dow Jones Industrial Average (DJI) fell 26 points to 10,271, the S&P 500 rose 6 points, closing 1,097, and the Nasdaq (NASD) was unchanged at 2,191.
On both the NYSE and Nasdaq, decliners outpaced advancers by 3-to-2. Volume on the NYSE was just over 1 billion shares, and Nasdaq traded a total of 708 million shares.
March crude oil rose 25 cents to $76.98 a barrel. The Energy Select Sector SPDR (XLE) fell 49 cents to $56.55.
April gold fell $6 to $1,112 an ounce, and the PHLX Gold/Silver Sector Index (XAU) fell $1.79 to $154.76.
What the Markets Are Saying
In yesterday’s Daily Market Outlook, I compared the technical condition of the Dow with the S&P 500 and concluded that Monday’s and Tuesday’s action was positive. Both indices had successfully popped through the bearish channel trend and were in positions to mount an attack on the 50-day moving average.
Today, we’ll discuss Nasdaq. Whereas the Dow and the S&P have successfully moved out of the bearish channel, the Nasdaq has not.
Yesterday’s high coincides with the high of Tuesday, but it did not break it. And in contrast to the other indices, the Nasdaq is far from last week’s high, while the Dow and the 500 have broken that number and are positioned to attack the 50-day moving average.
Yesterday, the index traded in the upper ranges of the 2,110 to 2,210 support zone with its 50-day moving average at 2,228.
But, like the other indices, the internal indicators have announced buy signals. The stochastic buy signal is the strongest of all, and last year was an accurate short-term indicator. If the Nasdaq had been acting stronger this week, I believe that the stochastic would have more meaning. But it hasn’t, so for now, I suggest keeping your powder dry; wait to see if the Nasdaq can pick up some buying volume and close above the highs of the last two days before committing any reserves to it.
Today’s Trading Landscape
Earnings to be reported before the opening include: Abiomed, Allergan, Alliant Energy, Alliant Techsystems, Arch Chemicals, Argon ST, Avon Products, BCE, Belden, Belo, Benchmark Electronics, BioCryst Pharmaceuticals, Bunge, Burger King, Carbo Ceramics, CIGNA, Cincinnati Financial, Clorox, CME Group, Conmed, Diamond Management, Diamond Offshore Drilling, Domtar, EarthLink, Entegris, Flowers Food, H.H. Gregg, Hillenbrand, Hospira, i2 Tech, Invacare, Kellogg, Knoll, Kulicke & Soffa, Lennox International, Lubrizol, MasterCard, Matrix Service Co, Maximus, Medical Action Industries, MF Global, MicroStrategy, Micrus Endovascular, MKS Instruments, MoneyGram, Moody’s, MWI Veterinary Supply, NCR Corp., Northrop Grumman, Nu Skin, O’Charley’s, Omega Health, Omniture, Pain Therapeutics, Palomar Medical, Penn National Gaming, PepsiAmericas, PolyOne, Power Integrations, Quizote Corp., Reynolds American, Rofin-Sinar Technologies, Royal Dutch Shell, Royal Gold, RTI International Metals, Sally Beauty, Sara Lee, Snap-On, Sony, Spectra Energy, Spirit AeroSystems, Starwood Hotels, Suburban Propane, Tenneco, Timberland, Ultratech, Wabco Holdings and Watson Wyatt.
Earnings to be reported after the close: Accuray, Actel, Activision Blizzard, Advanced Analogic Technologies, Advisory Board, Alkermes, American Science & Engineering, Badger Meter, Baldor Electric, Bebe Stores, BigBand Networks, Bioform Medical, Blackbaud, Cogo Group, Con-Way, Cypress Sharpridge Investments, Dionex, Dun & Bradstreet, Edwards Lifesciences, Esco Technologies, Essex Property Trust, Exide, FalconStor Software, Fidelity National Information Services, FMC Corp., Harmonic, Hawaiian Airlines, Illumina, Intermec, Ixia, Liquidity Services, Luminex, Mettler-Toledo, Microchip Technology, Micros System, Mid-America Apartment, Minerals Tech, Monolithic Power, MTS Systems, Multi-Fineline Electronix, National Fuel Gas, NetSuite, NIC, Openwave, Opnext, PC Connection, PerkinElmer, PharMerica, Phase Forward, Phoenix Technologies, Pitney Bowes, Powerwave, Ralcorp Holdings, ResMed, Shutterfly, Silicon Image, Solera, Stericycle, SuccessFactors, Sunoco, Synchronoss Technologies, Techwell, TeleCommunication Systems, TTM Technologies, Varian and Vertex Pharmaceuticals.
Economic reports due: chain store sales, Monster Employment Index, jobless claims (the consensus expects 455,000), productivity and costs (the consensus expects 7% for non-farm productivity and -3.8% for unit labor costs), RBC Cash Index, factory orders (the consensus expects 0.3%), EIA natural gas report, Fed balance sheet and money supply.
Quarterly earnings news (earnings vs. estimated):
- Bunge (BG): 21 cents vs. 83 cents
- CIGNA (CI): $1.03 vs. 96 cents
- Hillenbrand (HI): 48 cents vs. 40 cents
- MAXIMUS (MMS): 83 cents vs. 64 cents
- MF Global (MF): 1 cent vs. 2 cents
- PolyOne (POL): 14 cents vs. 8 cents
- Spectra Energy (SE): 33 cents vs. 33 cents
- Starwood Hotels (HOT): 51 cents vs. 22 cents
- Wabco Holdings (WBC): 36 cents vs. 29 cents
Related Articles:
- Why Wall Street NEEDS ‘Volcker Rule’
- How Moving Averages Work
- 10 Tips to Getting Started With Technical Analysis
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