Loading...
 

After The Close - The holiday-shortened trading week proved to be another productive one for those long equities. The bulls were emboldened by a number of good quarterly earnings releases from Corporate America, news that the House of Representatives approved a plan to give the policymakers in Washington more time to come to a concrete deal on the U.S. debt-ceiling limit, and some fairly supportive data on the U.S. economy, particularly on housing and unemployment. For the week, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index were 1.8%, 0.5%, and 1.1% higher, respectively. The broader S&P 500 index finished above the 1,500 mark and the index of 30 bellwether companies currently sits within a stone’s throw of 14,000. The tech-heavy NASDAQ was also able to overcome a difficult week for Apple (AAPL) stock to finish in the black. It was helped by an eye-catching three-day advance for Netflix (NFLX) stock.

Today’s equity market performance was once again driven by earnings news. Dow-30 components Procter & Gamble (PG - Free Procter & Gamble Stock Report), Microsoft (MSFT - Free Microsoft Stock Report), and AT&T (T - Free AT&T Stock Report) all reported results in the last 24 hours and shares of each blue chip moved higher after the releases. Of note was the Procter & Gamble report, which showed that profits soared past expectations. The consumer products giant also raised its guidance for the current year. In addition to the Dow companies, shares of Starbucks (SBUX), Oshkosh (OSK), Halliburton (HAL), and Tempur-Pedic (TPX) rose after each company posted solid quarterly results. From a sector perspective, nearly all of the major groups were in positive territory, with some leadership coming from consumer noncyclical, energy, and technology stocks. Overall, advancing issues led decliners on both the Big Board and the NASDAQ today.

The latest weekly performances of the U.S. equity indexes and, to a lesser extent, the European bourses clearly show that investors are throwing caution to the wind at the moment. As noted, the broader S&P 500 Index is up sharply thus far in the first trading month of 2013. Other indicators, including, the S&P 500 Volatility Index (or VIX) finishing the week below 13 (a clear indication that the equity market is overextended), the recent steady rise in yield of the 10-year Treasury note, which inversely to the price, and the pullback in the price of gold, suggest that the investment community’s appetite for risk is very high right now. A fairly cooperative earnings season, in which many companies have exceeded lower expectations, seems to be the primary catalyst behind the recent buying on Wall Street.

The economic news—though light this week—also was cheered by investors. The home sales data were pretty good. Although new (reported today) and existing home sales in December eased on a sequential-month basis, both were up sharply from the prior-year period in yet further signs that the long-suffering industry is on the mend. More significant, home inventories remain low and prices continue to firm, which should result in another positive year for the builders in 2013. Yesterday, we also learned that first-time jobless claims fell to another five-year low, with the latest week showing a drop in such filings to 330,000. Next week, the economic beat heats up considerably, with reports due on durable goods orders, consumer confidence, the first-reading on fourth-quarter 2012 GDP, personal income and spending, manufacturing activity, and employment and unemployment.

There will also be no shortage of earnings news next week, either. Of note are reports from six Dow 30 companies, including energy giants Chevron (CVX - Free Chevron Stock Report) and Exxon Mobil (XOM - Free Exxon Stock Report). The latter oil concern surpassed Apple this week as the world’s most valuable company after the technology behemoth’s shares fell sharply following the release of its latest quarterly results on Wednesday afternoon.

As noted, trading will begin next week with the U.S. equity market clearly overbought. Thus, it is our sense that both the earnings and economic news will have to be fairly supportive for this bull-run to continue or at the very least to avoid a spate of profit taking over the final few days of January. With regards to the economy, next week’s reports will shed a great deal of light on how the consumer is feeling, which will likely be a good gauge as to how the economy will perform over the first half of 2013. The consumer accounts for roughly two-thirds of the nation’s economic output.   - William G. Ferguson

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.  

-

12:30 PM EST  - The U.S. stock market is moving higher today, as traders look to extend the gains logged over the past several sessions. As we pass the noon hour in New York, the Dow Jones Industrial Average is up 53 points (0.4%); the S&P 500 Index is ahead six points (0.4%); and the tech-heavy NASDAQ, which is displaying some leadership, is adding on 14 points (0.5%). Nonetheless, there is a tentative tone to today’s session. Market breadth is neutral, as advancing stocks are just nominally higher than decliners on both the NYSE and the NASDAQ. Furthermore, many of the smaller names, as measured by the Russell 2000, are lagging the larger averages. This may suggest that traders are getting a bit more conservative, and concentrating on the larger companies. Most of the market sectors are moving higher, with strength in the consumer cyclical names and in the conglomerates.  However, the basic materials stocks are lower, as are the defensive utility issues.

Technically, the S&P 500 Index is testing the 1,500 mark. This area, due to its correspondence with a large round number, may hold some “psychological” significance for traders. Consequently, it could take a few attempts to break through this key level. Sentiment is still quite bullish, if not overly so.

Meanwhile, there was just one economic report out this morning. New home sales for December came in at 369,000 units annualized, which was lower than last month’s upwardly revised figure of 398,000 and also below analyst expectations. The homebuilding stocks, as a group, had been lower on the news, but have since recovered.

Meanwhile, the fourth-quarter earnings season continues to pick up speed. Today, we heard from a few Dow components. Specifically, technology giant Microsoft (MSFT - Free Microsoft Stock Report) put out a decent report and that stock is modestly higher on the news. Also in the blue chip index, Procter & Gamble (PG - Free P&G Stock Report) is seeing its stock rise after the consumer products leader issued a good release. Telecom giant AT&T (T Free AT&T Stock Report) also put out mixed results, but those shares are slightly higher.  In other areas, Juniper Networks (JNPR) is seeing its stock advance, after the company posted better-than-anticipated profits in the most-recent quarter. We also received a good issuance from Starbucks (SBUX) and that stock is gaining.

Stocks moving higher today include: QLogic (QLGC), Netflix (NFLX), and Synaptics (SYNA). Issues headed lower include: International Speedway (ISCA), and Select Comfort (SCSS).   - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

-

Stocks to Watch from The Survey The earnings parade continues today, and investors are going over a few reports from Dow-30 components. Wall Street appears particularly pleased with December-period results from consumer products heavyweight Procter & Gamble (PGFree Procter & Gamble Stock Report), and that stock is up nicely in pre-market trading, while shares of telecommunications services provider AT&T (TFree AT&T Stock Report) are indicating a marginally higher opening this morning. Conversely, shares of software giant Microsoft (MSFTFree Microsoft Stock Report) are down slightly ahead of the bell.

Of course, it’s not just about the Dow components, and there are a number of other notable reports that investors are pouring over this morning. Shares of coffee house operator Starbucks (SBUX), energy services provider Halliburton (HAL), and heavy truck manufacturer Oshkosh Corp. (OSK) are all trading significantly higher on earnings news. Likewise, Tempur-Pedic (TPX) stock is surging in the premarket, after the mattress company reported fourth-quarter results that were better than feared. On the other hand, shares of securities brokerage E*Trade Financial (ETFC) and toymaker Hasbro (HAS) are down ahead of the bell on earnings news (Hasbro released preliminary fourth-quarter results). – Matthew E. Spencer

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

-

Before The Bell - There just seems to be no slowing these bulls down. Indeed, on a day in which tech icon Apple (AAPL) clearly disappointed investors with a subpar earnings report and a consequent $63.50-a-share plunge in its stock, the rest of the equity market managed to climb further, putting several indexes within striking distance of new multi-year highs.

All told, the Dow Jones Industrial Average rose another 46 points; the Standard and Poor's 500 Index, weighed down by the aforementioned Apple, closed unchanged; and the NASDAQ, where Apple is domiciled, shed 22 points. The small-and-mid-cap indexes closed nicely higher; and the advance-decline line on the Big Board and the NASDAQ were both in positive territory, to the tune of some four to three. It was not a memorable performance by any stretch, but it was comforting nonetheless, especially given how far and how fast the stock market has come. For those who put faith in the old maxim that as January goes so goes the year, the first-month showing by the equity market has been uplifting to say the least.

Meanwhile, aside from earnings, which have come in somewhat better than expected so far this quarter, we also have the economy to consider. And yesterday, the news was again encouraging, as first-time jobless claims fell to another five-year low, with the latest week showing a drop in such filings to 330,000. Expectations had been that this metric would have climbed from the previous week's 335,000 to 355,000. Instead, claims dropped to their lowest level since January of 2008. The four-week average for claims came to 351,750. Should this trend continue, expectations for monthly payroll figures would logically increase, while the stubbornly high 7.8% jobless rate would likely start to come down more aggressively. Whatever the case, the latest week's better economic news clearly helped to underpin the bullish case on Wall Street yesterday.

Now, a new day dawns, and once again the bulls seem to be back in the driver's seat, as the S&P 500 futures are up by more than three points, with about a half hour to go before the start of the new trading day, while the NASDAQ futures are climbing by better than nine points. The market, meantime, is being helped by a succession of positive earnings reports out this morning, including one from Dow-30 component Procter & Gamble (PG - Free Procter & Gamble Stock Report). The household products giant not only topped earnings estimates in its second (December) fiscal quarter, but it also raised expectations going forward. That issue, which closed out yesterday's session at $70.42 a share, is indicating an opening of $71.61 a share currently. Also doing well this morning, on a better earnings report than expected, is oilfield services giant Halliburton (HAL). The world's second largest oilfield drilling company's shares likewise are indicated higher in the pre-market. On the other hand, Microsoft (MSFT - Free Microsoft Stock Report) saw its profits edge lower for the latest quarter, and that issue is trending a bit to the downside in the pre-market. Overall, though, the news has been better than not on the sales and earnings fronts.

And the Street will need to see these generally upbeat trends in earnings and the economy remain favorable given the recent rise in equity prices. While the market is not all that richly capitalized, it is not very cheap either, with the VIX volatility index now at a low 12.69--or within striking distance of its 52-week trough of 12.29. The latest VIX reading suggests a clearly overbought market. By comparison, the last 52 weeks has seen a high in the VIX of 27.73. At the bull market's nadir in 2009, the VIX had shot up above 60. So, there would appear to be a lot of potential vulnerability in the market to any disappointing news of some magnitude.   - Harvey S. Katz     

At the time of this article's writing, the author did not have positions in any of the companies mentioned.