The following is my market commentary after the Eco news this morning.
Have a great day.
After the Eco # Employment, premarket traded up strong to SPX future 1459 near to 2/22/07 intra high, 1465 +/- which is progressively confirming "Breakout Retest" of LT price channel scenario which I commented since the Mar 05, 2007 bottom. As noted before, the Breakout Retest scenario is a strong technical price action which is normally projecting new highs, by which we can anticipate SPX 1550 with successful continuation of uptrend momentum above SPX future 1465 and SPX cash 1461.57 intraday high on 2/22/07. For the Feb '07 highs were Qs 45.55, for Nasdaq 2531 +/-, and for DOW 12795 +/-.
The Thursday Holiday trading was positive before the today's Eco number. The price actions traded above the resistances as continuation of the intraday breakout above the resistances which I commented 4/3 intraday breakout. "Qs intra high 44.31 was R3 and SPX traded to 1440.57 making new intraday high which is a good sign. SPX 1440 is 1/25/07 resistance. DOW intra high, 12534.27 is Feb '07 low, but closing above 50ma and making higher high of Mar '07 is progressively positive. NASDAQ didn't trade above Mar '07 high; but, it is trading above 50ma resistance." and a follow-through on 4/4-4/5 price actions above the intraday resistance which I noted as "Progressively Confirming Breakout Retest" Scenario. Therefore, as noted, we now can anticipate SPX 1460 +/- as the next target and SPX 1550 with successful consolidation and a breakout above the Feb '07 high to SPX 1550 +/-. I will be reassessing market strength along the way to SPX 1460 +/- and then to SPX 1550 +/-.
The aforementioned "Breakout Retest" Scenario is consistent view since I called 3/5/07 bottom after I sensed that market was signaling it, and then, market is progressively confirming the view.
4:20 pm : Stocks kicked off a new week with a customary sense of caution heading into earnings season and some uncertainty as to what a strong jobs report means for the economy and interest rate outlook.
With investors unable to trade on monthly employment data Friday, a market preoccupied with concerns about a significant slowdown in economic growth initially found some comfort after March payrolls rose a stronger than expected 180,000. An upward revision to February's figure and the unemployment rate unexpectedly falling to 4.4% provided further evidence that the economy remains in good shape, notwithstanding the downturn in the housing and manufacturing sectors, and that consumer spending should continue to grow at close to the recent trend of 3% real growth.
Be that as it may, a tight labor market accompanied by rising wage costs leaves a Fed still fixated on the "high level of resource utilization" with little reason to cut interest rates anytime soon. Such a reminder plays into why our Market View is only Modestly Bullish and contributed to the market's lack of direction throughout much of the trading day.
Given such sizable gains a week earlier, with the Dow, S&P 500 and Nasdaq up 1.8% on average over the previous four days of trading, it also wasn't a surprise to see some profit-taking activity, especially heading into the start of earnings season.
Per usual, Dow component Alcoa (AA 34.86 +0.27) will officially kick things off when it reports Q1 results after the bell tomorrow. General Electric (GE 34.77 -0.25), which reports on Friday, is the only other major company to report this week with the flood of reports beginning a week from today.
Expectations are for operating earnings for the S&P 500 in aggregate to increase only 3% to 4% over the same quarter of 2006, which suggests 14 consecutive quarters of double-digit profit growth for the S&P 500 will come to an end.
Among the six sectors posting gains, Materials paced the way higher; but since it carries the smallest weighting on the S&P 500, the sector's 1.3% advance did not provide much of a boost to the broader market. Diversified Chemicals was one of today's best performing S&P industry groups amid reports that Dow Chemical (DOW 46.62 +2.15) is being eyed by a consortium of private investors prepared to make a $50 billion offer. That would mark the largest LBO ever.
Unfortunately for the bulls, the only other sector turning in a respectable performance was Utilities, which ranks ninth in terms of influence on the S&P 500 and climbed in part due to its defensive characteristics.
The Industrials sector was also in focus after Berkshire Hathaway disclosed that it took a 10.9% stake in Burlington Northern Santa Fe (BNI 88.10 +5.38). The news earmarked Railroads as the day's best performer and lit a fire under transportation stocks that also benefited from oil's biggest decline in three months.
Crude for May delivery plunged 4.3% to $61.51/bbl as traders continued to unwind the Iranian risk premium that lifted oil to six-month highs two weeks ago.
The absence of notable leadership in Financials and Technology, however, eventually stalled follow-through momentum. Regional Banks were among the day's worst performers amid further evidence of troubles in the secondary mortgage market. American Home Mortgage Investment Corp (AHM 21.61 -4.23) tumbled 16% after cutting its Q1 and full-year earnings guidance on Friday.
With growth prospects within Technology coming into question, it too succumbed to some modest consolidation. Advanced Micro Devices (AMD 13.35 +0.49) lowered its Q1 revenue guidance, which provided a boost to Intel (INTC 20.10 +0.52). AMD shares still closed higher, though, as shareholders applauded plans to reduce 2007 capital expenditures by about $500 mln. Intel's 2.7% advance was the biggest reason behind the Dow's ability to eke out enough of a gain to extend its winning streak to seven days. DJ30 +8.94 DJTA +1.9% NASDAQ -2.16 SP500 +0.86 NASDAQ Dec/Adv/Vol 1710/1347/1.74 bln NYSE Dec/Adv/Vol 1671/1606/1.19 bln
3:30 pm : The major averages are bouncing off their worst levels of the afternoon but the bulls' late-day heroics aren't amounting to much. Not only are the most influential of S&P 500 sectors also among today's biggest laggards, but slightly negative market internals and below average volume merely underscore the lack of confidence buyers have in extending such sizable gains garnered a week earlier.
With only 30 minutes left in the session, the NYSE still hasn't seen more than 1.0 bln shares trade hands. The average gains on the Dow, S&P 500 and Nasdaq stand at a paltry 0.10%. DJ30 +12.37 NASDAQ +2.24 SP500 +1.74 NASDAQ Dec/Adv/Vol 1678/1359/1.41 bln NYSE Dec/Adv/Vol 1672/1574/976 mln
3:00 pm : Buyers continue to show their reluctance to build onto last week's surprise rally, leaving the door open for sellers to creep in and prevent the indices from gaining much traction. After briefly turning negative for the first time this afternoon, the Dow has inched back above the flat line.
However, if it weren't for a 3.0% advance in Intel (INTC 20.17 +0.59), which currently accounts for nearly five Dow points, the price-weighted index would still be in negative territory and also in jeopardy of seeing a six-day winning streak come to an end. DJ30 +4.83 NASDAQ -1.20 SP500 +0.43 NASDAQ Dec/Adv/Vol 1700/1317/1.30 bln NYSE Dec/Adv/Vol 1717/1526/880 mln
2:30 pm : Stocks continue to relinquish what was recently shaping up to be decent day's performance on the part of the bulls as Technology, Health Care and even Energy become the last victims of consolidation. The latter's downturn was inevitable as oil prices now down more than 4% near $61.60/bbl is almost too tempting not to lock in some of the sector's seasonal bounce over the last few weeks.
Technology's reversal has been modest in scope, but the absence of its leadership has contributed to a reversal in the Nasdaq, which is now at risk of having its six-day winning streak snapped. DJ30 +3.63 NASDAQ -1.77 SP500 +0.35 NASDAQ Dec/Adv/Vol 1686/1320/1.21 bln NYSE Dec/Adv/Vol 1678/1533/812 mln
2:00 pm : More of the same for stocks as market breadth remains mixed. As reflected in the A/D line, advancers on the NYSE still hold a 17-to-14 edge over decliners while declining issues on the Nasdaq hold a slight 15-to-14 margin over advancing issues. The ratio of up to down volume, though, is in favor of the bulls on both the Big Board and Composite.
Be that as it may, momentum on the part of buyers is fading as a reversal in Financials trumps the fact that oil prices (-3.6%) have recently slipped below $62/bbl. DJ30 +17.23 NASDAQ +1.13 SP500 +2.38 NASDAQ Dec/Adv/Vol 1556/1423/1.07 bln NYSE Dec/Adv/Vol 1459/1742/718 mln
1:30 pm : After breaking out of their narrow trading range 30 minutes ago, the indices are holding steady at improved levels. All 10 sectors are now in positive territory, but the S&P 500's least influential sector -- Materials -- leading the way further explains why market gains remain modest at best.
Financials and Health Care are today's worst performers, barely finding enough buyers to remain positive and, since they combine to account for one third of the influence on the S&P 500, the lack of more notable leadership to the upside is stalling recent momentum. DJ30 +33.07 NASDAQ +4.63 SP500 +4.13 NASDAQ Dec/Adv/Vol 1541/1427/1.01 bln NYSE Dec/Adv/Vol 1461/1727/670 mln
1:00 pm : A renewed wave of buying interest since the last update, spearheaded by further deterioration in oil prices, lifts the indices to session highs. Crude for May delivery is now down 2.9% near $62.40/bbl after failing to find support around a key technical level ($62.93/bbl).
While Energy has pared its gains in sympathy with oil's sell-off, the sector's ability so far to withstand such a sharp move to the downside and still hold onto a modest gain is acting as an additional source of market support. DJ30 +27.87 NASDAQ +5.94 SP500 +4.03 NASDAQ Dec/Adv/Vol 1532/1433/906 mln NYSE Dec/Adv/Vol 1462/1705/592 mln
12:30 pm : No real change in the proceedings as the afternoon session gets underway. On the Dow, Intel (INTC 20.15 +0.57) continues to provide the bulk of what little support the blue-chip index is getting. The stock is up 2.9% amid further evidence of rival AMD's struggles to gain market share. Advanced Micro Devices (AMD 13.50 +0.64) lowered its Q1 revenue guidance, but shares are up 5% after announcing plans to reduce 2007 capital expenditures by about $500 mln.
McDonald's (MCD 46.33 +0.55) is turning in the next best performance (+1.2%) while DuPont (DD 49.83 +0.51), in sympathy with takeover speculation lifting shares of rival Dow Chemical (DOW 46.52 +2.05) to a new 52-week high, is also up more than 1.0%. DJ30 +9.99 NASDAQ +1.60 SP500 +1.93 NASDAQ Dec/Adv/Vol 1597/1335/818 mln NYSE Dec/Adv/Vol 1498/1649/540 mln
12:00 pm : Stocks are trading with little fanfare midday as investors juggle a strong jobs report, acquisition activity and falling oil prices with a sense of caution heading into the Q1 earnings season. Dow component Alcoa (AA 35.04 +0.45) will officially kick things off after the bell tomorrow.
With the market increasingly sensitive to weak economic data of late, investors have found some reprieve after March payrolls rose a stronger than anticipated 180,000. An upward revision to February's figure and the unemployment rate unexpectedly falling to 4.4% have also provided ample fuel to keep consumer spending rising at about a 3% real rate. The data also serving as another reminder that the Fed won't be cutting interest rates anytime soon, though, is contributing to lack of more conviction on the part of buyers.
Of the six sectors trading higher, Materials paces the way following reports that Dow Chemical (DOW 46.62 +2.15) is being eyed by a consortium of private investors prepared to make a $50 bln offer, which would mark the largest LBO ever. Even though the company has quashed those rumors, a nearly 5% gain in DOW shares still earmarks Diversified Chemicals as one of today's best performing S&P industry groups.
The Energy sector is also turning in a respectable performance, especially since oil prices are down 1.5% near $63.40/bbl. The latter development, coupled with Berkshire Hathaway disclosing that it has taken a 10.9% stake in Burlington Northern Santa Fe (BNI 88.80 +6.08), have lit a fire under transportation stocks and provided a lift to the Industrials sector.
However, given an average gain of 1.8% for the major indices over the last four days of trading and the absence of notable leadership in Financials and Technology, it's also not surprising to see some profit taking efforts stalling follow-through interest. DJ30 +8.12 DJTA +2.2% NASDAQ +1.00 SP500 +1.53 NASDAQ Dec/Adv/Vol 1544/1374/716 mln NYSE Dec/Adv/Vol 1440/1679/468 mln
11:30 am : The major averages are bouncing off their recent lows but hardly enough to make a significant change in the standings. The Energy sector's resilience in the face of falling oil prices for a fourth consecutive session is acting as a source of recent market support.
Explorers, Refiners, and Drillers are now among today's best performing S&P industry groups after a recent survey said that self-serve regular gasoline rose roughly 18 cents per gallon nationwide over the past two weeks. Crude for May delivery is down 1.0% near $63.60/bbl. DJ30 +16.25 NASDAQ +1.71 SP500 +2.24 NASDAQ Dec/Adv/Vol 1565/1314/608 mln NYSE Dec/Adv/Vol 1477/1595/390 mln
11:00 am : Not much has changed since the last update as stocks continue to vacillate around the flat line. Contributing to the lack of conviction on the either the bullish or bearish side of the aisle is the growing realization that a winning streak of 14 consecutive quarters of double-digit profit growth for the S&P 500 is likely to be snapped.
Per usual, Dow component Alcoa (AA 34.81 +0.22) will officially kick off earnings season when it reports Q1 results tomorrow after the bell. General Electric (GE 34.90 -0.12), which reports on Friday, is the only other major company to report this week with the flood of reports beginning a week from today. Expectations are for operating earnings for the S&P 500 in aggregate to increase only 3% to 4% over the same quarter of 2006. DJ30 +5.61 NASDAQ -1.54 SP500 +0.99 NASDAQ Dec/Adv/Vol 1618/1209/482 mln NYSE Dec/Adv/Vol 1542/1454/300 mln
10:30 am : The major averages are now mixed as split sector leadership dictates this morning's lackluster trading action. With the Dow, S&P 500 and Nasdaq up 1.8% on average last week, it's not all that surprising though to see such sizable gains invite some profit taking.
Consumer Discretionary, Staples and Health Care have been the latest sectors to join Tech and Financials to the downside. Even though sector declines are modest at best, weakness in such influential areas removes leadership from five sectors that account for nearly 70% of the total weighting on the S&P 500. DJ30 +5.23 NASDAQ -2.72 SP500 +0.75 NASDAQ Dec/Adv/Vol 1639/1108/346 mln NYSE Dec/Adv/Vol 1483/1501/202 mln
10:00 am : The indices still cling to paltry gains as recent reversals in Financials and Technology stall follow-through efforts. Thrifts & Mortgage and Regional Banks are among today's worst performing S&P industry groups amid further evidence of troubles in the secondary mortgage market. American Home Mortgage Investment Corp (AHM 21.20 -4.64) cut its Q1 and full-year earnings guidance on Friday.
Tech has inched back above the flat line, as Intel (INTC 19.92 +0.34) catches a bid at the expense of a Q1 sales warning from rival Advanced Micro Devices (AMD 13.23 +0.37); but Sanmina-SCI Corp (SANM 3.64 -0.17) saying Q2 revenues will fall short of forecasts leaves investors less optimistic about the sector's growth prospects. Electronic Manufacturing Services is one of today's worst performers.DJ30 +16.93 NASDAQ +1.90 SP500 +2.45 NASDAQ Dec/Adv/Vol 1293/1256/150 mln NYSE Dec/Adv/Vol 1039/1468/66 mln
09:40 am : As expected, stocks kick off a new week building on previous gains. With investors unable to trade on monthly employment data Friday, a market preoccupied with concerns about a significant slowdown in economic growth is embracing a stronger than expected rise in March payrolls that provides ample fuel to keep consumer spending rising at about a 3% real rate.
Further deterioration in oil prices and customary Monday-morning M&A news are also providing a floor of early support. Dow Chemical (DOW 47.40 +2.91) is up 6.6% following reports that it is being eyed by a consortium of private investors for $50 bln, which would mark the largest LBO ever.DJ30 +10.48 NASDAQ +2.19 SP500 +1.45 NASDAQ Vol 78 mln NYSE Vol 42 mln
09:15 am : S&P futures vs fair value: +3.1. Nasdaq futures vs fair value: +6.0.
09:00 am : S&P futures vs fair value: +3.5. Nasdaq futures vs fair value: +7.0. The futures market continues to trade above fair value, indicating a higher open for equities. While Friday's surprisingly strong jobs report easing concerns about a significant slowdown in economic growth remains the primary driver behind the bullish bias, the economically-sensitive transportation space is likely to get an additional lift from strength in railroads. Burlington Northern (BNI) is up 3.5% in pre-market action after Berkshire Hathaway (BRK.A) disclosed in a Friday filing that it has taken a 10.9% stake in BNI. The Dow Jones Transportation Average is up 7.8% year to date.
08:30 am : S&P futures vs fair value: +4.2. Nasdaq futures vs fair value: +7.2. The stage remains set for last week's winning streak to carry over into this morning's opening bell. With the Dow, S&P 500 and Nasdaq up 1.8% on average over the last four days of trading, with falling oil prices and M&A activity driving renewed buying interest, both are acting as additional catalysts behind what is shaping up to be a solid follow-through effort. Crude for May delivery is down nearly 1.0% at $63.65/bbl while Dow Chemical (DOW) is reportedly being eyed by a consortium of private investors prepared to make a $50 bln offer. That would mark the biggest LBO ever.
08:00 am : S&P futures vs fair value: +4.1. Nasdaq futures vs fair value: +7.0. Early indications are pointing to a higher open for stocks. With the market increasingly sensitive to weak economic data of late, investors are rallying around a report released on Friday that showed the economy remains in good shape notwithstanding the downturn in the housing and manufacturing sectors. March payrolls were up a stronger than anticipated 180,000 and February's figure was upwardly revised to show a 113,000 gain compared to the original report of 97,000. The unemployment rate unexpectedly fell to 4.4%.
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