Stocks moved ahead again yesterday, but despite the good earnings reports and economic news, it lacked the enthusiasm of Tuesday’s broad advance. The many encouraging reports led to a rally in the U.S. dollar — a deviation from the strong dollar/weak stock and commodities markets pattern of the past year and a half.
The Dow Industrials rose again with Bank of America (BAC) the best performer, up 3.3%. Home Depot (HD) and Caterpillar (CAT) also gained. Caterpillar announced Q4 earnings prior to the opening that exceeded estimates by a wide margin.
Fed policy was again on the minds of market commentators following the release of the minutes of the FOMC’s January meeting. It was revealed that the Fed governors are “slightly more confident” that a recovery is taking hold, according to the Wall Street Journal. And they raised their 2010 GDP forecast to 3.2% from 3%. But despite some improvement, the Fed voiced no desire to increase interest rates in the near future.
Health care, consumer discretionary, consumer staples and industrials led the market, while energy and utilities underperformed.
At the close, the Dow Jones Industrial Average (DJI) was up 40 points to 10,309, the S&P 500 (SPX) rose 5 points to 1,100, and the Nasdaq (NASD) gained 12 points to 2,226.
On the NYSE, volume was about 1 billion shares, and advancers exceeded decliners by more than 2-to-1. The Nasdaq’s advancers were ahead by 3-to-2 with volume of 530 million shares.
Crude oil for March delivery rose 32 cents to $77.33 a barrel, and the Energy Select Sector SPDR (XLE) fell 8 cents to $56.82.
February gold gained 20 cents to settle at $1,119.0 an ounce. The PHLX Gold/Silver Sector Index (XAU) fell 1.02 to 162.97.
What the Markets Are Saying
On the surface, yesterday’s modest advance following a very strong day on Tuesday, might encourage the bulls since profit-taking was minimal. But this sort of ordinary advance for the averages with lower volume and less impressive breadth is not good when the indices are approaching what could be a major resistance zone.
On the NYSE breadth was positive 2-to-1 on Wednesday versus 5-to-1 positive on Tuesday. This lack of enthusiasm at the very beginning of a major resistance zone is a disappointment, especially considering the extent of the bounce accompanied by a key reversal day less than two weeks ago.
Yesterday, the Dow Industrials got to within less than 70 points of their next hurdle — the 50-day moving average. But the S&P 500 still has a bigger reach to its 50-day, while Nasdaq’s intraday high came within less than 3 points of the barrier.
Will the major indices break their respective 50-day moving averages, or roll over and meander around for several more weeks?
The primary internal indicator for the indices is the Relative Strength Index (RSI). The RSI for the Dow is 52.91, for the “500” it is 52.06, and for Nasdaq it is 54.52. Every index is in the slightly above average reading and far from the overbought numbers of December, which were north of 70.
The other internal indicators are just poking above what is considered average levels.
My guess, then, is that we could get a series of tests of the 50-day moving averages on the major indices with a better-than-even chance that the barriers will fall. But in order to jump-start the market’s engine, NYSE volume will have to increase to at least 1.4 billion shares from its current anemic levels with 1 billion shares trading.
Watch volume for the next directional clue. Tomorrow we’ll take a look at the latest sentiment indicators.
Today’s Trading Landscape
Earnings to be reported before the opening include: Ameren, Apache, Arbitron, Ariad Pharmaceuticals, Asset Acceptance Capital, AtriCure, Avista, Barnes Group, Barrick Gold Corp., Build-A-Bear Workshop, Cabela’s, Colfax, CryoLife, Daimler AG, DIRECTV, DryShips, ev3, Five Star Quality Care, Gentiva Health Services, GLG Partners, Goodyear Tire, Heartland Payment Systems, Hormel Foods, i2 Tech, Incyte, Invesco Mortgage Capital, KBW, Knology, K-Swiss, Life Time Fitness, Lumber Liquidators, MGM Mirage, Navigant Consulting, Nexen, Noble Energy, NRG Energy, Omega Health, Orbital Sciences, Patterson Companies, Playboy, Pool Corp, Pride International, Public Service, Reliance Steel, Revlon, School Specialty, Spartan Motors, Spectranetics, State Auto Financial, Stealthgas, Swift Energy, Sycamore, Teekay Shipping, Terra Industries, Toro, Ultralife, Vasco Data Security, Ventas, Wal-Mart, Watson Wyatt, WellCare Health Plan, West Pharmaceutical Services, Williams Companies, Williams Partners and Windstream.
Earnings to be reported after the close: Acacia Research, Anadigics, Anworth Mortgage Asset, Argo Group, Aruba Networks, AuthenTec, Bioform Medical, Bucyrus, Builders FirstSource, California Pizza, CBS Corp, CEC Entertainment, Dell, Developers Diversified Realty, Dress Barn, Eclipsys, Energy Transfer, Energy Transfer Equity, Fairfax Financial Holdings, First Solar, Gen-Probe, GFI Group, Grand Canyon Education, Harleysville Group, Hittite Microwave, Home Properties of NY, Ingram Micro, Internet Brands, Intuit, Ixia, j2 Global, Marchex, Maxwell Technologies, Maxygen, Merit Medical Systems, Morningstar, Nanometrics, Navios Maritime, On Assignment, RC2, Red Robin Gourmet Burgers, Rocky Brands, Sapient, Select Medical, Semitool, Senior Housing Properties Trust, Sequenom, Sunstone Hotel, The Knot, Universal American Corp., VCA Antech, Washington REIT, WebMD Health and Wright Medical.
Economic reports due: producer price index (the consensus expects 0.8% and 0.1% ex-food and energy), jobless claims (the consensus expects 440,000), leading indicators (the consensus expects 0.5%), Philadelphia Fed Survey (the consensus expects 17), EIA natural gas report, EIA petroleum status report, Fed balance sheet and money supply.
Quarterly earnings news (earnings vs. estimates):
- Arbitron (ARB): 33 cents vs. 32 cents
- Avista (AVA): 40 cents vs. 42 cents
- Barnes GP (B): 11 cents vs. 21 cents
- Barrick Gold Corp. (ABX): 61 cents vs. 57 cents
- Colfax (CFX): 26 cents vs. 24 cents
- ev3 (EVVV): 23 cents vs. 13 cents
- Lumber Liquidators (LL): 25 cents vs. 25 cents
- Nexen (NXY): 49 cents vs. 50 cents
- Orbital Sciences (ORB) 16 cents vs. 12 cents
- WellCare Health Plans (WCG): 47 cents vs. 44 cents
- West Pharmaceutical Services (WST): 67 cents vs. 65 cents
- Wal-Mart (WMT): $1.17 vs. $1.12
- Windstream (WIN) 17 cents vs. 20 cents
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