Best Buy Trounces Estimates, Helps Sentiment

The market is strong again in early trading. Yesterday's action was impressive, in that the early rally completely reversed mid-day, but then a late day rally pulled the indexes back into positive territory by a wide margin. Felt like more short-covering to me, but I'll take it.

This morning, there were a couple of positive earnings reports. Best Buy (BBY) crushed estimates by reporting $1.61 vs. $1.40 estimates. The company also raised guidance for 2010, something analysts thought was unheard of in the consumer space. The positive news boosted BBY +15%, and is pulling other retail stocks higher.

ConAgra (CAG) also reported better than expected earnings, and its stock is higher as well.

In economic news, final 4Q GDP came in at -6.3%, which is a horrible figure, but better than the -6.6% economists were expecting. Q1 of this year will likely be another weak number, but I suspect that Q1 will mark the bottom of the contraction, and that GDP will begin to creep back towards positive territory as the year progresses.

Treasury Sec Geithner is testifying before the House Financial Services Committee this morning to discuss regulation and how the government oversees risk-taking.

Also, yesterday's market selloff was in part attributed to a weak 5-year bond auction (that is, weak demand). Today there is a 7-year Note auction, so it will be interesting to see if there is a similar outcome.

Asian markets were higher overnight; the dollar is higher, but so are oil and gold (go figure); the 10-year yield is up a bit to 2.80%; and the VIX is falling just below its 200-day average near 41.11.

Also, the put/call ratio is above 1.0 for the first time since Mar. 6th. This is probably option players wanting to buy put options to protect the gains they have made in the recent rally.

Trading comment: I added a little bit of long exposure (XBI, XLP) into yesterday's selloff, but I didn't add as much as I would have liked given how short-lived the selloff was. Today feels similar.

I hate to feel like I am chasing prices higher, but the longer the market trades sideways, the closer it could be to breaking out above that 825 level that has been resistance on the SPX for the last 4 days.

long XBI, XLP