Thursday, January 22, 2009

Earnings Season Is A Real Mixed Bag So Far

The market is trading lower in early trading, as it seems to have no memory from day to day. We are in the thick of earning season also, which makes for busy evenings and busy mornings, with tons of press releases coming out each day as well as conference calls being held.

Last night, Apple (AAPL) reported an exceptionally strong quarter, handily topping estimates. Guidance was also less conservative than it usually is. That got the stock moving after hours, and it is still up +7% this morning.

But Microsoft's report this morning reversed any spillover strength stemming from AAPL. MSFT missed consensus estimates, announced it is laying off 5000 workers, and said it will no longer issue guidance for the full year.

In addition to MSFT, there were also weak earnings reports in the tech sector from EBAY, Nokia, and Sony. All of these stocks are trading lower, and weighing on the Nasdaq.

The financials are also lower today, after a big bounce yesterday, led down by insurers. Last night, reports of insider buying from the CEOs of Bank of America (BAC) and JPMorgan (JPM) had banks stocks rallying after hours. But this morning, Aflac (AFL) is down -30% on concerns over some specific exposure it has on its balance sheet. There were also losses reported by banks like Fifth Third (FITB) and SunTrust (STI).

In healthcare, the reports were solid from the likes of UnitedHealth (UNH) and Baxter (BAX), and both of those stocks are higher.

In overseas news, Asian markets were higher overnight. The Bank of Japan said it will begin buying commercial paper and will consider buying corporate bonds to prevent a credit shortage. China said GDP grew +6.8% in Q4, which is the slowest pace in 7 years. China calculates GDP differently than we do, and some say in U.S. terms, growth would be closer to zero.

The dollar is mixed, while oil and commodities are lower. The 10-year yield is up again, for the 4th straight day, to 2.59%. The VIX is up 9% today back to 50, after a big plunge lower yesterday.

Trading comment: The market really has no memory from day to day, but the SPX 800 level seems to be holding, and I continue to look for a relief rally from the current oversold condition. The move higher in bond yields is helping my short bond position (TBT), which I am still holding. Gold is also starting to hold above its 50-day, a sign of strength.



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