Daily State of the Markets
Wednesday Morning – April 27, 2011
Good morning. While all eyes were on the chart of the S&P 500 yesterday, it is safe to say that all eyes will be on Ben Bernanke this afternoon. More specifically, traders watched the resistance zone at 1343 on the S&P 500’s daily chart to see if the blue chip index could follow the Dow’s lead and break out to a fresh new high for the current bull market cycle. And then today, everyone in the game will be watching the Fed Chairman’s first-ever press conference following the two-day FOMC meeting.
As has been the case lately, traders began to anticipate Tuesday that Mr. Bernanke isn’t likely to say anything to upset the apple cart this afternoon. The consensus thinking is that Gentle Ben will deal with the reporters in a professional fashion, avoid talking about the dollar (after all, this is the Treasury Secretary’s bailiwick), and confirm that interest rates aren’t going up anytime soon.
So, with hopes high that the Fed will remain “friendly” traders recognised that the “risk trade” can continue working for some time yet. Thus, the dollar was sold to a new multi-year low and stocks were pushed to new highs. It probably didn’t hurt that we were treated to another batch of decent earnings from some high profile industrial names such as Cummins (CMI), 3M (MMM), Agco (AGCO), and Illinois Tool (ITW).
Traders also got confirmation that the consumer is thus far relatively unfazed by the unrest in the Mideast, the tragedies in Japan, and the increase in oil prices. After taking a dive in March, sentiment surveys (including yesterday’s Consumer Confidence Index) have held steady or improved.
Speaking of sentiment, it is clear that the mood on the street has made a u-turn over that past five sessions. The more upbeat attitude helped traders push the S&P 500, NASDAQ, and Midcap indices to new cycle-highs on Tuesday. And more importantly, the S&P was able to produce an impressive breakout above the important resistance zone around 1340.
Without any real news to drive the action, it appears that a combination of short-covering and technical buying combined to trigger the jailbreak on the S&P. And given that the move occurred on higher volume than the day prior, the action is “all good” from a chart perspective. Thus, unless the bears can find a reason to produce a quick reversal, the textbooks tell us that the path of least resistance is higher for now.
Turning to this morning… S&P is back in the news with a downgrade of Japan’s rating outlook (although the move didn’t seem to hurt too much as the Nikkei rose +1.4%). Traders are also digesting another big batch of earnings reports, which continue to have a positive bent. However, the key to the day will be the Bernanke press conference. And while there aren’t any great expectations for the Fed Chief to say anything new, all eyes will be on Bernanke today at 12:30 pm eastern.
On the Economic front… Orders for long-lasting goods rose in March. The Commerce Department reported that Durable Goods orders increased by +2.5% during the month, which was above the consensus expectations for an increase of +2.2%. When you strip out the volatile orders for transportation, orders rose by +1.3%, which was below the consensus for +2.2%. The February reading was revised higher to +0.6% from -0.3%.
Thought for the day: Remember that you can choose a peaceful mode at any point of any day…
Here are the Pre-Market indicators we review each morning before the opening bell…
- Major Foreign Markets: Australia: -0.83% Shanghai: -0.46% Hong Kong: -0.48% Japan: +1.39% France: +0.70% Germany: +0.85% London: +0.22%
- Australia: -0.83%
- Shanghai: -0.46%
- Hong Kong: -0.48%
- Japan: +1.39%
- France: +0.70%
- Germany: +0.85%
- London: +0.22%
- Crude Oil Futures: +0.11 (May contract) to $112.32
- Gold: +$5.30 to $15008.80
- Dollar: lower against the Yen, Euro and Pound.
- 10-Year Bond Yield: Currently trading at 3.351%
- Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: +2.40 Dow Jones Industrial Average: +9 NASDAQ Composite: +6.22
- S&P 500: +2.40
- Dow Jones Industrial Average: +9
- NASDAQ Composite: +6.22
Wall Street Research Summary
Jacobs Engineering (JEC) – BMO Capital Cummins (CMI) – Target and estimates increased at Citi Lorillard (LO) – Citi InterActiveCorp (IAC) – Citi Taiwan Semiconductor (TSM) – Goldman sachs First Solar (FSLR) – Kaufman Bros Netflix (NFLX) – Needham Amazon.com (AMZN) – Target increased at Oppenheimer Valero (VLO) – Target increased at Oppenheimer
Federal Signal (FSS) – BMO Capital Lexmark (LXK) – Brean Murray, Carret; Citi Hospira (HSP) – Citi US Steel (X) – Goldman sachs Safeway (SWY) – Jefferies Home Depot (HD) – Estimates cut at JPMorgan Lowes (LOW) – Estimates cut at JPMorgan Helix Energy Solutions (HLX) – Morgan Stanley Roper Industries (ROP) – Oppenheimer Masco (MAS) – RBC Capital
Yesterday’s Earnings After The Bell
Estimate Altera ALTR $0.68 $0.65 Amazon.com AMZN $0.44* $0.60 Becton Dickinson BDX $1.41 $1.30 Broadcom BRCM $0.40* $0.59 CB Richard Ellis CBG $0.13 $0.12 CH Robinson CHRW $0.59 $0.60 DeVRY DV $1.32 $1.30 FMC Technologies FTI $0.35* $0.38 Illumina ILMN $0.35 $0.31 Life Technologies LIFE $0.85 $0.85 Nabors Industries NBR $0.29 $0.34 Stanley Black & Decker SWK $1.08* $1.01 Torchmark TMK $1.33 $1.64 Total System TSS $0.25 $0.25 Universal Health UHS $1.15 $0.94 Western Union WU $0.35 $0.34
Today’s Earnings Before The Bell
Estimate Allegheny Technologies ATI $0.59* $0.51 Boeing BA $0.78 $0.71 Baker Hughes BHI $0.87 $0.77 ConocoPhillips COP $1.82 $1.94 Dr. Pepper Snapple DPS $0.50 $0.46 DTE Energy DTE $1.11 $1.18 Exelon EXC $1.17 $1.05 General Dynamics GD $1.64 $1.61 Corning GLW $0.47 $0.44 Hess Corporation HES $2.74* $1.87 Invesco IVZ $0.41 $0.42 Moody’s MCO $0.67 $0.54 Meadwestvaco MWV $0.43 $0.23 Northrop Grumman NOC $1.67 $1.53 National Oilwell Varco NOV $1.00 $1.00 Parker-Hannifin PH $1.68 $1.55 Praxair PX $1.29 $1.26 Rockwell Automation ROK $1.14 $1.11 Sealed Air SEE $0.34 $0.38 Southern Company SO $0.50 $0.51 Thermo Fisher Scientific TMO $0.92 $0.88 Whirlpool WHR $2.11 $1.60 WellPoint Health WLP $2.35 $1.87 Watson Pharmaceuticals WPI $0.89 $0.86 Wyndham Worldwide WYN $0.44 $0.40* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: none
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