Energy Stocks Look Like They Have Bottomed
Another weak open in the stock market, but the last few big selloffs have recouped much of their losses by the end of the day. I would not be surprised to see a repeat today.
Earnings reports continue to roll in, but more important than whether or not the company beats estimates is how the stocks react. To wit:
- GE matched estimates and also said it is committed to its $1.24 dividend this year, which many investors had been concerned about. Nonetheless, the stock is down another -5% this morning.
- Conversely, Schlumberger (SLB) missed estimates by a couple cents, but the stock is surging +6.6% higher, as it looks like energy stocks may have bottomed in the near-term. Oil is lower this morning, but the whole energy sector is trading higher.
- Also, Harley-Davidson (HOG) missed estimates by a wide margin, and the stock is down. Ditto for Capital One (COF).
- Google (GOOG) beat estimates by 15 cents last night, and showed very solid growth. The stock is rallying +5% today, and is nicely above its 50-day average now.
- And talks that Pfizer (PFE) is looking to buy Wyeth (WYE) has the latter's stock jumping nearly 10%.
One of the reasons for yesterday's weakness, and this morning's as well, has been the chatter that China is manipulating its currency. Treasury Sec.-elect Geitner made comments about this yesterday, and this morning there was an article in the NY Times about it. Markets don't like this feather ruffling.
Asian markets were lower overnight. The dollar is bouncing today, weighing on commodities (except gold, which is higher). The 10-year yield is spiking to 2.66%, right at its 50-day average. And the VIX is a bit higher to 48.6.
Trading comment: Yesterday I added to some my energy/ag ETF positions. And I am still holding my index ETFs. I think the market has gotten oversold, and I like that the S&P has held the 800 level all week, despite some negative headlines. Given the magnitude of the pullback this month, I am anticipating a nice bounce, even if it is just a short-term bounce.
long GOOG, IEZ, MOO, SSO