CLOSING WRAP-UP, Apr. 20
By Jody Osborne, Optionetics.com
4/20/2005 5:15 PM EST
Disappointing inflation data just too much for the bulls to overcome. The Dow ($INDU) got off to a good start, but ultimately gave up 115.05 points to 10,012.36. The S&P 500 ($SPX) fell 15.28 points to 1,137.50. The Nasdaq ($COMPQ) lost 18.60 points, or 0.96 percent, to 1,913.76. Volume was above average with the NYSE trading 1.77 billion shares and the Naz turning over 2.04 billion shares. Market breadth was negative by an 8-to-25 and 9-to-21 margin on the Big Board and Naz respectively.
For the fourth time in six sessions, the Dow fell triple digits, but support at 10K held once again. Ironically, earnings news was positive, but traders were taken back by a worse than expected consumer price index [CPI] report. The Beige Book also showed that pricing pressures are rising and this has traders concerned that the Fed might stray from its “measured” pace in raising the Fed funds rate.
The CPI rose 0.6 percent overall and 0.4 percent at the core, above expectations for readings of 0.5 percent and 0.2 percent. This offset the benign reading providing by the PPI on Tuesday. The Beige Book showed that economic activity remains strong across the country, but that pricing pressures have increased. In fact, Fed fund futures are now pricing in a break in Fed rate hikes in September rather than August.
The negative economic news overshadowed several strong earnings announcements. Intel (INTC) reported earnings that were three cents above expectations on revenues of $9.4 billion. The company also was optimistic about the future despite obvious problems with the economy. After rising in the early going, Intel closed with a gain of just three cents.
Shares of Caterpillar (CAT) and Yahoo (YHOO) both held gains Wednesday after strong earnings reports. CAT not only announced strong than expected earnings for its first quarter, it also raised guidance going forward, leading to a gain of 3.6 percent. YHOO doubled its first quarter profits on revenues of more than $1 billion in its online advertising. The stock added 4.3 percent on the session to $34.87.
Support at 10K held for the Dow Wednesday, but the feeling on the Street has been anything but bullish. However, if earnings news can continue to be strong, stocks might garner some strength, but this will depend on inflation pressures and oil prices.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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