AI
Tuesday, May 15, 2007 6:59:22 PM
Market Update 070515
http://biz.yahoo.com/mu/update.html
4:20 pm : Stocks were all over the board Tuesday as investors weighed more proof of a potential rate cut sooner rather than later against a growing sense the market has gotten ahead of itself.
With the Fed reiterating last week that inflation remains a "predominant" concern, core CPI rising just 0.2% was initially viewed as very bullish. That pushed the year/year rate to 2.3%, a one-year low, and closer to the Fed's "comfort zone." However, with the bulls pricing in a fourth consecutive 0.1% increase in core CPI after a flat reading on core PPI last Friday, the market's initial bullish response lacked staying power.
It is worth noting that the Labor Dept. also cited risks from rising energy prices in this morning's CPI report. Even though crude prices are about 9% lower than a year ago, prices at the pump rose to a record average of $3.08 a gallon yesterday with two weeks to go before the summer driving season officially begins. Crude for June delivery surged 1.1% today to close at $63.17/bbl, but the Energy sector failed to take notice.
Also taking some steam out of stocks intraday was a report at 1:00 ET that showed home builders don't see a recovery in the troubled housing sector until next year. When the survey unexpectedly slid to a reading of 30 in May, matching the 15-year low set last September, the bears returned with evidence of their own to argue an increasingly overbought situation given deteriorating fundamentals.
Of the 5 economic sectors trading higher, Materials paced the way; but as the S&P 500's least influential sector, it wasn't surprising to see why its 1.0% advance had little impact on the broader market. Fertilizers & Agricultural Chemicals was the day's best performing S&P industry groups as Monsanto (MON 60.98 +2.68) soared 4.6% to an all-time after a report showed crop plantings are catching up to year-ago levels.
The absence of upside leadership from four of the S&P 500's five most heavily-weighted sectors, though, contributed to the bulls' struggles to keep anything except the Dow from finishing lower. The Dow closed in record territory despite disappointing earnings results from two of its components.
Home Depot (HD 38.22 -0.79) plunged 2.0% after posting a 30% drop in Q1 profits that missed expectations and guiding full-year earnings at the low end of prior forecasts. Wal-Mart (WMT 47.58 -0.26) was one of 12 other Dow components not contributing to the price-weighted index's latest charge into record territory today. Wal-Mart merely matched consensus estimates and warned that Q2 earnings might miss forecasts.
As evidenced by the Nasdaq turning in the worst performance among the majors, Technology was the biggest drag on stocks today. Semiconductor Equipment (-2.5%) ranked among the day's biggest laggards after Goldman Sachs added Applied Materials (AMAT 19.78 -0.64) to its Conviction Sell list ahead of AMAT's earnings after the close. BTK -1.1% DJ30 +37.06 DJTA +0.2% DJUA +0.3% DOT -0.9% NASDAQ -21.15 NQ100 -0.9% R2K -1.0% SOX -1.2% SP400 -0.4% SP500 -1.96 XOI -0.04% NASDAQ Dec/Adv/Vol 2135/886/2.13 bln NYSE Dec/Adv/Vol 1977/1251/1.50 bln
3:30 pm : Equities are rebounding from their afternoon lows, but buyer's last-minute attempts to cut losses have only been enough to inch the S&P 500 back into the green. The lack of upside leadership from four of the five most heavily-weighted sectors is contributing to the bulls' uphill battle.
As an aside, Limited Brands (LTD 26.15 -1.34) has resumed trading following reports it is selling a majority interest in Express and exploring strategic options for Limited Stores. However, the stock is plunging 4.6% as accompanied downside EPS guidance acts as an offset. Apparel Retail (-2.4%) now ranks as one of this year's ten worst performing S&P industry groups (-6.1%). DJ30 +49.69 NASDAQ -15.70 SP500 +0.44 NASDAQ Dec/Adv/Vol 1982/1017/1.82 bln NYSE Dec/Adv/Vol 1857/1340/1.30 bln
3:00 pm : Selling remains the name of the game heading into the final hour of trading. Influential sectors like Financials, Health Care, and Consumer Discretionary recently joining Technology in negative territory have removed some notable leadership and pushed the S&P 500 below the flat line.
Adding to the Nasdaq's recent struggles has been its inability to find support above the key technical level of 2533. The Dow, in contrast, is still on pace to close at a new record but is nearly 100 points off its best levels. DJ30 +38.54 NASDAQ -16.65 SP500 -0.54 NASDAQ Dec/Adv/Vol 1985/1015/1.62 bln NYSE Dec/Adv/Vol 1642/1543/1.14 mln
2:30 pm : Stocks continue to lose ground as market sentiment deteriorates even further. Just over an hour ago, advancers on the NYSE held a more than 2-to-1 edge over advancers but now hold a slim 17-to-14 advantage.
The Nasdaq has fared even worse as decliners now hold the same 16-to-12 edge enjoyed by advancers 90 minutes ago. A split ratio of down to up volume further underscores the market's increasingly cautious tone given the lack of upcoming data to support stocks at current valuations.DJ30 +65.94 NASDAQ -9.90 SP500 +3.57 NASDAQ Dec/Adv/Vol 1691/1278/1.43 bln NYSE Dec/Adv/Vol 1465/1707/1.02 bln
2:00 pm : The major averages are now trading mixed and at afternoon lows, spearheaded by a reversal in Technology (-0.2%). The influential sector has recently slipped into the red, as everything from software and semiconductors to networking and hardware have succumbed to a renewed wave of selling interest.
As evidenced by a more noticeable pullback in the Russell 2000 Index, one can argue that further deterioration in bonds lifting yields across the curve is sparking valuation concerns among growth stocks since higher rates greatly diminish the borrowing power of smaller companies. The 10-year note is now down 6 ticks to yield 4.71% as traders remain unconvinced that today's data will result in a rate cut anytime soon. DJ30 +76.65 NASDAQ -5.55 R2K -0.3% SP500 +4.15 NASDAQ Dec/Adv/Vol 1683/1265/1.32 bln NYSE Dec/Adv/Vol 1283/1869/942 mln
1:30 pm : Sellers show some resolve within the last 30 minutes after a report showed that home builders don't see a recovery in the troubled housing sector until next year. At the top of the hour, a confidence survey compiled by the National Association of Home Builders unexpectedly slid three points to 30 in May, matching the 15-year low set last September.
Since the data suggest that less than one third of builders remain optimistic and showed the subprime mortgage crisis infected other parts of mortgage market, the bears have returned to question the sustainability of a market that looks increasingly overbought given deteriorating fundamentals. DJ30 +107.85 NASDAQ +3.56 SP500 +8.41 NASDAQ Dec/Adv/Vol 1438/1500/1.20 bln NYSE Dec/Adv/Vol 1246/1880/860 mln
1:00 pm : Onward and upward remains today's driving mantra as buyers remain in complete control of the action. The Energy sector is back at its best levels intraday as Exxon Mobil (XOM 81.71 +0.46) eyes its early month, 52-week high.
Thirty of the sector's 33 components are catching a bid. However, since everything from Explorers (+1.8%) to Drillers (+1.5%) are trading higher in sympathy with another surge in oil prices (+1.2%) is likely to give the bears some fodder to support their case for a pullback given the market's relentless run over the last several weeks. DJ30 +125.23 NASDAQ +7.47 SP500 +9.78 XOI +0.7% NASDAQ Dec/Adv/Vol 1291/1632/1.09 bln NYSE Dec/Adv/Vol 966/2152/778 mln
12:30 pm : The afternoon session kicks off in much the same way as the morning session came to a close, with stocks trading higher across the board. Electrical Equipment Manufacturing (+4.5%) is still the day's best performing S&P industry group after Agilent (A 37.63 +1.72) trumped a Q2 earnings shortfall with upside guidance.
The Technology sector's paltry 0.2% gain, though, still stands as today's smallest advance among the 10 sectors trading higher. Semiconductor Equipment (-1.3%) is today's second biggest laggard while Electronic Manufacturing Services (-0.8%) also ranks among today's ten worst performers. Solectron (SLR 3.32 -0.14) is down 4% after Credit Suisse initiated coverage with an "Underperform" rating. DJ30 +114.02 NASDAQ +7.14 SOX -0.1% SP500 +8.68 NASDAQ Dec/Adv/Vol 1284/1639/998 mln NYSE Dec/Adv/Vol 970/2139/700 mln
12:00 pm : The major averages are retracing morning highs midday as market bulls rally around more evidence that pricing pressures continue to subside.
With inflation still pegged as the Fed's "predominant" concern and given the monthly CPI report's ability to influence monetary policy, core CPI matching economists' forecasts with a 0.2% increase pushed the year/year rate to 2.3%. Since that's a one-year low and closer to the Fed's "comfort zone," investors are back to pricing in the increased likelihood that a rate cut might come sooner rather than later.
Even though the market was anticipating a fourth straight 0.1% increase in core CPI, especially after a flat reading on core PPI last Friday, the underlying bullish momentum has reasserted itself and sent short sellers running for cover.
Of the 10 economic sectors trading higher, Materials (+1.5%) is turning in the best performance; but a 1.0% surge in Industrials is providing the bulk of early leadership. Ingersoll-Rand (IR 49.71 +3.10) is soaring 6.7% to an all-time high after saying it may sell its Bobcat unit and announcing plans to double its share buyback program to $4 bln. The sector's transportation components showing good resilience to a 1.0% rise in oil prices is also noteworthy.
Telecom and Utilities are also up more than 1.0% while even the Consumer Discretionary (+0.4%) and Staples (+0.7%) sectors are posting solid performances despite disappointing earnings results from two Dow components.
Home Depot (HD 38.66 -0.35) is down nearly 1.0% after posting a 30% drop in Q1 profits that missed expectations and guiding full-year earnings at the low end of prior forecasts. Wal-Mart (WMT 47.56 -0.27) is one of only five other Dow components not contributing to the price-weighted index's latest charge into record territory today. Wal-Mart merely matched consensus estimates and warned that Q2 earnings might miss forecasts. BTK +0.3% DJ30 +110.48 DJTA +1.0% DJUA +1.2% DOT +0.1% NASDAQ +7.13 NQ100 +0.3% R2K +0.5% SOX -0.1% SP400 +0.6% SP500 +9.47 XOI +0.5% NASDAQ Dec/Adv/Vol 1216/1644/874 mln NYSE Dec/Adv/Vol 1024/2050/598 mln
11:30 am : Stocks are still sporting modest gains but continue to back off their best levels of the morning. The influential Financials sector seeing its intraday gain more than halved over the last hour amid a reversal in the brokerage group, is contributing to the pullback.
The Dow, though, is still in record territory and paces the way higher among the majors as 21 of its 30 components post gains. General Motors (GM 31.77 +1.15) is leading the charge for a second straight day, nearly matching yesterday's 3.9% surge following another analyst upgrade. Other index blue chips up at least 1.0% include AA, AXP, BA, MCD, MMM, MO, PG, UTX, and VZ. DJ30 +82.49 NASDAQ +1.93 SP500 +6.04 NASDAQ Dec/Adv/Vol 1364/1472/741 mln NYSE Dec/Adv/Vol 1187/1860/498 mln
11:00 am : The indices are off their morning highs but buying remains widespread across most areas. Oil prices recently spiking to session highs (+1.1%) and climbing back above $63/bbl amid continued unrest in Nigeria have taken some steam out of the recent rally. Fortunately for the bulls, a subsequent move to the upside in the Energy sector (+0.7%) is acting as somewhat of an offset to the commodity's potential inflationary characteristics. Oil & Gas Equipment (+1.1%) is now among today's top ten performers.
It is worth noting, though, that the Labor Dept. did cite risks from rising energy prices in this morning's CPI report. Even though crude prices are about 9% lower than a year ago, gasoline prices jumped 4.7% in April and averaged $2.83 a gallon. Prices at the pump rose to a record $3.08 a gallon yesterday and the summer driving season doesn't even start for two more weeks. DJ30 +84.19 NASDAQ +3.46 SP500 +6.50 NASDAQ Dec/Adv/Vol 1162/1632/590 mln NYSE Dec/Adv/Vol 925/2028/380 mln
10:30 am : So much for the bears trying to have their overbought argument heard as a renewed wave of buying interest sends sellers running for cover. The broad-based nature of the market's recent spike higher amid a surge in volume suggests that program trading is likely behind the move as well.
The Dow is rallying even further into unchartered territory as traders trained to view every dip as a buying opportunity use this morning's pullback as a springboard to jump back into nearly everything and anything. All 10 sectors are now trading higher, led by a 1.0% advance in Industrials and a rebound in Financials that has more than erased yesterday's 0.5% setback in the S&P 500's most heavily-weighted sector. DJ30 +101.01 NASDAQ +10.64 SP500 +9.74 NASDAQ Dec/Adv/Vol 1051/1661/424 mln NYSE Dec/Adv/Vol 815/2093/266 mln
10:00 am : The major averages are now mixed as split industry leadership dictates the first hour of trading. Of the six sectors trading higher, Industrials (+0.5%) is providing the bulk of early leadership. Ingersoll-Rand (IR 50.20 +3.59) is its best performing component, soaring 7.7% to an all-time high after saying it is exploring strategic alternatives and announcing plans to double its share buyback program to $4 bln. Telecom and Utilities are turning in similar 0.5% gains; but since both are among the least influential sectors on the S&P 500, it's easy to see why their performances aren't having much of an influence on the broader market.
The absence of leadership from Technology and Health Care has contributed to the Nasdaq's recent reversal. Biotech (-1.6%) is today's worst performing S&P industry group in large part because of a downgrade-induced 5.2% plunge in Amgen (AMGN 53.17 -2.90). Tech's biggest weak spot is Semiconductor Equipment (-1.5%) after Goldman Sachs added Applied Materials (AMAT 20.07 -0.35) to its Conviction Sell list ahead of AMAT's earnings after the close. DJ30 +14.46 NASDAQ -8.80 SP500 +1.01 NASDAQ Dec/Adv/Vol 1413/1112/186 mln NYSE Dec/Adv/Vol 1229/1484/88 mln
09:40 am : Stocks open an upbeat note, getting a lift from more evidence that pricing pressures are abating somewhat. Before the bell, April core CPI rose just 0.2%. While the market was hoping for an even smaller 0.1% increase, the year/year rate now stands at a one-year low of 2.3%, suggesting inflation remains reasonably well contained.
On the earnings front, Home Depot (HD 38.00 -1.01) opened down 2.6% after Q1 earnings fell short of Wall Street expectations and full-year guidance checked in at the low end of prior forecasts. However, that hasn't stopped the Dow from briefly hitting a new intraday high. Despite warning that Q2 earnings might miss forecasts, Wal-Mart (WMT 48.05, +0.19) is actually catching a bid following its in-line report. DJ30 +34.07 NASDAQ +0.74 SP500 +3.39 NASDAQ Vol 88 mln NYSE Vol 42 mln
09:15 am : S&P futures vs fair value: +2.0. Nasdaq futures vs fair value: -1.5. Futures indications are off their best levels and back to signaling a mixed open for stocks. While today's CPI report overall is encouraging, the core rate not checking in with a fourth consecutive 0.1% increase, which the bulls were anticipating after a flat reading on core PPI last Friday, appears to be stalling recent momentum. With earnings season coming to a close and this week's most influential economic report (e.g. CPI) now in the rearview mirror, the market also seems to be running out of catalysts to keep a bid in a market that looks increasingly overbought given deteriorating fundamentals.
09:00 am : S&P futures vs fair value: +2.5. Nasdaq futures vs fair value: +1.0. Early sentiment continues to improve as both the S&P 500 and Nasdaq 100 futures are now trading above fair value. Aside from another tame inflation read again increasing hopes of the Fed possibly easing sooner rather than later, Wal-Mart (WMT) now being called higher in pre-market action is providing some leadership. The Nasdaq, though, is barely positive as two more downgrades on Amgen (AMGN) are contributing to a 5% sell-off in the biotech giant.
08:33 am : S&P futures vs fair value: +1.0. Nasdaq futures vs fair value: -0.8. Futures trade spikes higher following encouraging economic data, but now merely suggest a flat open for stocks since today's earnings news remains an overhang. Total CPI rose 0.4% (consensus 0.5%) in April. The more closely-watched core rate rose 0.2%, matching economists' forecasts but pushing the year/year rate to 2.3%. That's closer to the Fed's "comfort zone" and will at worst keep policy makers on hold with any tightening efforts for the time being. The NY Empire State Index rebounded to 8.0 in May (consensus 9.0) from 3.8 in April. Bonds have also improved in response to the data; the 10-year note is now up 3 ticks to yield 4.68%.
http://biz.yahoo.com/mu/update.html
4:20 pm : Stocks were all over the board Tuesday as investors weighed more proof of a potential rate cut sooner rather than later against a growing sense the market has gotten ahead of itself.
With the Fed reiterating last week that inflation remains a "predominant" concern, core CPI rising just 0.2% was initially viewed as very bullish. That pushed the year/year rate to 2.3%, a one-year low, and closer to the Fed's "comfort zone." However, with the bulls pricing in a fourth consecutive 0.1% increase in core CPI after a flat reading on core PPI last Friday, the market's initial bullish response lacked staying power.
It is worth noting that the Labor Dept. also cited risks from rising energy prices in this morning's CPI report. Even though crude prices are about 9% lower than a year ago, prices at the pump rose to a record average of $3.08 a gallon yesterday with two weeks to go before the summer driving season officially begins. Crude for June delivery surged 1.1% today to close at $63.17/bbl, but the Energy sector failed to take notice.
Also taking some steam out of stocks intraday was a report at 1:00 ET that showed home builders don't see a recovery in the troubled housing sector until next year. When the survey unexpectedly slid to a reading of 30 in May, matching the 15-year low set last September, the bears returned with evidence of their own to argue an increasingly overbought situation given deteriorating fundamentals.
Of the 5 economic sectors trading higher, Materials paced the way; but as the S&P 500's least influential sector, it wasn't surprising to see why its 1.0% advance had little impact on the broader market. Fertilizers & Agricultural Chemicals was the day's best performing S&P industry groups as Monsanto (MON 60.98 +2.68) soared 4.6% to an all-time after a report showed crop plantings are catching up to year-ago levels.
The absence of upside leadership from four of the S&P 500's five most heavily-weighted sectors, though, contributed to the bulls' struggles to keep anything except the Dow from finishing lower. The Dow closed in record territory despite disappointing earnings results from two of its components.
Home Depot (HD 38.22 -0.79) plunged 2.0% after posting a 30% drop in Q1 profits that missed expectations and guiding full-year earnings at the low end of prior forecasts. Wal-Mart (WMT 47.58 -0.26) was one of 12 other Dow components not contributing to the price-weighted index's latest charge into record territory today. Wal-Mart merely matched consensus estimates and warned that Q2 earnings might miss forecasts.
As evidenced by the Nasdaq turning in the worst performance among the majors, Technology was the biggest drag on stocks today. Semiconductor Equipment (-2.5%) ranked among the day's biggest laggards after Goldman Sachs added Applied Materials (AMAT 19.78 -0.64) to its Conviction Sell list ahead of AMAT's earnings after the close. BTK -1.1% DJ30 +37.06 DJTA +0.2% DJUA +0.3% DOT -0.9% NASDAQ -21.15 NQ100 -0.9% R2K -1.0% SOX -1.2% SP400 -0.4% SP500 -1.96 XOI -0.04% NASDAQ Dec/Adv/Vol 2135/886/2.13 bln NYSE Dec/Adv/Vol 1977/1251/1.50 bln
3:30 pm : Equities are rebounding from their afternoon lows, but buyer's last-minute attempts to cut losses have only been enough to inch the S&P 500 back into the green. The lack of upside leadership from four of the five most heavily-weighted sectors is contributing to the bulls' uphill battle.
As an aside, Limited Brands (LTD 26.15 -1.34) has resumed trading following reports it is selling a majority interest in Express and exploring strategic options for Limited Stores. However, the stock is plunging 4.6% as accompanied downside EPS guidance acts as an offset. Apparel Retail (-2.4%) now ranks as one of this year's ten worst performing S&P industry groups (-6.1%). DJ30 +49.69 NASDAQ -15.70 SP500 +0.44 NASDAQ Dec/Adv/Vol 1982/1017/1.82 bln NYSE Dec/Adv/Vol 1857/1340/1.30 bln
3:00 pm : Selling remains the name of the game heading into the final hour of trading. Influential sectors like Financials, Health Care, and Consumer Discretionary recently joining Technology in negative territory have removed some notable leadership and pushed the S&P 500 below the flat line.
Adding to the Nasdaq's recent struggles has been its inability to find support above the key technical level of 2533. The Dow, in contrast, is still on pace to close at a new record but is nearly 100 points off its best levels. DJ30 +38.54 NASDAQ -16.65 SP500 -0.54 NASDAQ Dec/Adv/Vol 1985/1015/1.62 bln NYSE Dec/Adv/Vol 1642/1543/1.14 mln
2:30 pm : Stocks continue to lose ground as market sentiment deteriorates even further. Just over an hour ago, advancers on the NYSE held a more than 2-to-1 edge over advancers but now hold a slim 17-to-14 advantage.
The Nasdaq has fared even worse as decliners now hold the same 16-to-12 edge enjoyed by advancers 90 minutes ago. A split ratio of down to up volume further underscores the market's increasingly cautious tone given the lack of upcoming data to support stocks at current valuations.DJ30 +65.94 NASDAQ -9.90 SP500 +3.57 NASDAQ Dec/Adv/Vol 1691/1278/1.43 bln NYSE Dec/Adv/Vol 1465/1707/1.02 bln
2:00 pm : The major averages are now trading mixed and at afternoon lows, spearheaded by a reversal in Technology (-0.2%). The influential sector has recently slipped into the red, as everything from software and semiconductors to networking and hardware have succumbed to a renewed wave of selling interest.
As evidenced by a more noticeable pullback in the Russell 2000 Index, one can argue that further deterioration in bonds lifting yields across the curve is sparking valuation concerns among growth stocks since higher rates greatly diminish the borrowing power of smaller companies. The 10-year note is now down 6 ticks to yield 4.71% as traders remain unconvinced that today's data will result in a rate cut anytime soon. DJ30 +76.65 NASDAQ -5.55 R2K -0.3% SP500 +4.15 NASDAQ Dec/Adv/Vol 1683/1265/1.32 bln NYSE Dec/Adv/Vol 1283/1869/942 mln
1:30 pm : Sellers show some resolve within the last 30 minutes after a report showed that home builders don't see a recovery in the troubled housing sector until next year. At the top of the hour, a confidence survey compiled by the National Association of Home Builders unexpectedly slid three points to 30 in May, matching the 15-year low set last September.
Since the data suggest that less than one third of builders remain optimistic and showed the subprime mortgage crisis infected other parts of mortgage market, the bears have returned to question the sustainability of a market that looks increasingly overbought given deteriorating fundamentals. DJ30 +107.85 NASDAQ +3.56 SP500 +8.41 NASDAQ Dec/Adv/Vol 1438/1500/1.20 bln NYSE Dec/Adv/Vol 1246/1880/860 mln
1:00 pm : Onward and upward remains today's driving mantra as buyers remain in complete control of the action. The Energy sector is back at its best levels intraday as Exxon Mobil (XOM 81.71 +0.46) eyes its early month, 52-week high.
Thirty of the sector's 33 components are catching a bid. However, since everything from Explorers (+1.8%) to Drillers (+1.5%) are trading higher in sympathy with another surge in oil prices (+1.2%) is likely to give the bears some fodder to support their case for a pullback given the market's relentless run over the last several weeks. DJ30 +125.23 NASDAQ +7.47 SP500 +9.78 XOI +0.7% NASDAQ Dec/Adv/Vol 1291/1632/1.09 bln NYSE Dec/Adv/Vol 966/2152/778 mln
12:30 pm : The afternoon session kicks off in much the same way as the morning session came to a close, with stocks trading higher across the board. Electrical Equipment Manufacturing (+4.5%) is still the day's best performing S&P industry group after Agilent (A 37.63 +1.72) trumped a Q2 earnings shortfall with upside guidance.
The Technology sector's paltry 0.2% gain, though, still stands as today's smallest advance among the 10 sectors trading higher. Semiconductor Equipment (-1.3%) is today's second biggest laggard while Electronic Manufacturing Services (-0.8%) also ranks among today's ten worst performers. Solectron (SLR 3.32 -0.14) is down 4% after Credit Suisse initiated coverage with an "Underperform" rating. DJ30 +114.02 NASDAQ +7.14 SOX -0.1% SP500 +8.68 NASDAQ Dec/Adv/Vol 1284/1639/998 mln NYSE Dec/Adv/Vol 970/2139/700 mln
12:00 pm : The major averages are retracing morning highs midday as market bulls rally around more evidence that pricing pressures continue to subside.
With inflation still pegged as the Fed's "predominant" concern and given the monthly CPI report's ability to influence monetary policy, core CPI matching economists' forecasts with a 0.2% increase pushed the year/year rate to 2.3%. Since that's a one-year low and closer to the Fed's "comfort zone," investors are back to pricing in the increased likelihood that a rate cut might come sooner rather than later.
Even though the market was anticipating a fourth straight 0.1% increase in core CPI, especially after a flat reading on core PPI last Friday, the underlying bullish momentum has reasserted itself and sent short sellers running for cover.
Of the 10 economic sectors trading higher, Materials (+1.5%) is turning in the best performance; but a 1.0% surge in Industrials is providing the bulk of early leadership. Ingersoll-Rand (IR 49.71 +3.10) is soaring 6.7% to an all-time high after saying it may sell its Bobcat unit and announcing plans to double its share buyback program to $4 bln. The sector's transportation components showing good resilience to a 1.0% rise in oil prices is also noteworthy.
Telecom and Utilities are also up more than 1.0% while even the Consumer Discretionary (+0.4%) and Staples (+0.7%) sectors are posting solid performances despite disappointing earnings results from two Dow components.
Home Depot (HD 38.66 -0.35) is down nearly 1.0% after posting a 30% drop in Q1 profits that missed expectations and guiding full-year earnings at the low end of prior forecasts. Wal-Mart (WMT 47.56 -0.27) is one of only five other Dow components not contributing to the price-weighted index's latest charge into record territory today. Wal-Mart merely matched consensus estimates and warned that Q2 earnings might miss forecasts. BTK +0.3% DJ30 +110.48 DJTA +1.0% DJUA +1.2% DOT +0.1% NASDAQ +7.13 NQ100 +0.3% R2K +0.5% SOX -0.1% SP400 +0.6% SP500 +9.47 XOI +0.5% NASDAQ Dec/Adv/Vol 1216/1644/874 mln NYSE Dec/Adv/Vol 1024/2050/598 mln
11:30 am : Stocks are still sporting modest gains but continue to back off their best levels of the morning. The influential Financials sector seeing its intraday gain more than halved over the last hour amid a reversal in the brokerage group, is contributing to the pullback.
The Dow, though, is still in record territory and paces the way higher among the majors as 21 of its 30 components post gains. General Motors (GM 31.77 +1.15) is leading the charge for a second straight day, nearly matching yesterday's 3.9% surge following another analyst upgrade. Other index blue chips up at least 1.0% include AA, AXP, BA, MCD, MMM, MO, PG, UTX, and VZ. DJ30 +82.49 NASDAQ +1.93 SP500 +6.04 NASDAQ Dec/Adv/Vol 1364/1472/741 mln NYSE Dec/Adv/Vol 1187/1860/498 mln
11:00 am : The indices are off their morning highs but buying remains widespread across most areas. Oil prices recently spiking to session highs (+1.1%) and climbing back above $63/bbl amid continued unrest in Nigeria have taken some steam out of the recent rally. Fortunately for the bulls, a subsequent move to the upside in the Energy sector (+0.7%) is acting as somewhat of an offset to the commodity's potential inflationary characteristics. Oil & Gas Equipment (+1.1%) is now among today's top ten performers.
It is worth noting, though, that the Labor Dept. did cite risks from rising energy prices in this morning's CPI report. Even though crude prices are about 9% lower than a year ago, gasoline prices jumped 4.7% in April and averaged $2.83 a gallon. Prices at the pump rose to a record $3.08 a gallon yesterday and the summer driving season doesn't even start for two more weeks. DJ30 +84.19 NASDAQ +3.46 SP500 +6.50 NASDAQ Dec/Adv/Vol 1162/1632/590 mln NYSE Dec/Adv/Vol 925/2028/380 mln
10:30 am : So much for the bears trying to have their overbought argument heard as a renewed wave of buying interest sends sellers running for cover. The broad-based nature of the market's recent spike higher amid a surge in volume suggests that program trading is likely behind the move as well.
The Dow is rallying even further into unchartered territory as traders trained to view every dip as a buying opportunity use this morning's pullback as a springboard to jump back into nearly everything and anything. All 10 sectors are now trading higher, led by a 1.0% advance in Industrials and a rebound in Financials that has more than erased yesterday's 0.5% setback in the S&P 500's most heavily-weighted sector. DJ30 +101.01 NASDAQ +10.64 SP500 +9.74 NASDAQ Dec/Adv/Vol 1051/1661/424 mln NYSE Dec/Adv/Vol 815/2093/266 mln
10:00 am : The major averages are now mixed as split industry leadership dictates the first hour of trading. Of the six sectors trading higher, Industrials (+0.5%) is providing the bulk of early leadership. Ingersoll-Rand (IR 50.20 +3.59) is its best performing component, soaring 7.7% to an all-time high after saying it is exploring strategic alternatives and announcing plans to double its share buyback program to $4 bln. Telecom and Utilities are turning in similar 0.5% gains; but since both are among the least influential sectors on the S&P 500, it's easy to see why their performances aren't having much of an influence on the broader market.
The absence of leadership from Technology and Health Care has contributed to the Nasdaq's recent reversal. Biotech (-1.6%) is today's worst performing S&P industry group in large part because of a downgrade-induced 5.2% plunge in Amgen (AMGN 53.17 -2.90). Tech's biggest weak spot is Semiconductor Equipment (-1.5%) after Goldman Sachs added Applied Materials (AMAT 20.07 -0.35) to its Conviction Sell list ahead of AMAT's earnings after the close. DJ30 +14.46 NASDAQ -8.80 SP500 +1.01 NASDAQ Dec/Adv/Vol 1413/1112/186 mln NYSE Dec/Adv/Vol 1229/1484/88 mln
09:40 am : Stocks open an upbeat note, getting a lift from more evidence that pricing pressures are abating somewhat. Before the bell, April core CPI rose just 0.2%. While the market was hoping for an even smaller 0.1% increase, the year/year rate now stands at a one-year low of 2.3%, suggesting inflation remains reasonably well contained.
On the earnings front, Home Depot (HD 38.00 -1.01) opened down 2.6% after Q1 earnings fell short of Wall Street expectations and full-year guidance checked in at the low end of prior forecasts. However, that hasn't stopped the Dow from briefly hitting a new intraday high. Despite warning that Q2 earnings might miss forecasts, Wal-Mart (WMT 48.05, +0.19) is actually catching a bid following its in-line report. DJ30 +34.07 NASDAQ +0.74 SP500 +3.39 NASDAQ Vol 88 mln NYSE Vol 42 mln
09:15 am : S&P futures vs fair value: +2.0. Nasdaq futures vs fair value: -1.5. Futures indications are off their best levels and back to signaling a mixed open for stocks. While today's CPI report overall is encouraging, the core rate not checking in with a fourth consecutive 0.1% increase, which the bulls were anticipating after a flat reading on core PPI last Friday, appears to be stalling recent momentum. With earnings season coming to a close and this week's most influential economic report (e.g. CPI) now in the rearview mirror, the market also seems to be running out of catalysts to keep a bid in a market that looks increasingly overbought given deteriorating fundamentals.
09:00 am : S&P futures vs fair value: +2.5. Nasdaq futures vs fair value: +1.0. Early sentiment continues to improve as both the S&P 500 and Nasdaq 100 futures are now trading above fair value. Aside from another tame inflation read again increasing hopes of the Fed possibly easing sooner rather than later, Wal-Mart (WMT) now being called higher in pre-market action is providing some leadership. The Nasdaq, though, is barely positive as two more downgrades on Amgen (AMGN) are contributing to a 5% sell-off in the biotech giant.
08:33 am : S&P futures vs fair value: +1.0. Nasdaq futures vs fair value: -0.8. Futures trade spikes higher following encouraging economic data, but now merely suggest a flat open for stocks since today's earnings news remains an overhang. Total CPI rose 0.4% (consensus 0.5%) in April. The more closely-watched core rate rose 0.2%, matching economists' forecasts but pushing the year/year rate to 2.3%. That's closer to the Fed's "comfort zone" and will at worst keep policy makers on hold with any tightening efforts for the time being. The NY Empire State Index rebounded to 8.0 in May (consensus 9.0) from 3.8 in April. Bonds have also improved in response to the data; the 10-year note is now up 3 ticks to yield 4.68%.
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