Thursday, April 16, 2009

More Profit Reports Beating Expectations

There were a handful of positive earnings reports this morning, beating consensus expectations. But after yesterday's strong late-day rally, the news isn't propping up the market in early trading. Of course, given the late day turnarounds we have been seeing, its safe to say its still early. (I think the last time I said that the market got whacked)

Here are some of the companies that topped earnings estimates: JPMorgan (JPM), Baxter (BAX), Illinois Tool Works (ITW), and Nokia (NOK). All four of these stocks are nicely higher today, a good sign to see given the angst over how Q1 earnings reports would come in. JPM also looks to have benefited from some "write-ups" of previously written down assets.

Economic news was mixed. The Philly Fed Index came in better than expected, like the Empire index yesterday. But housing starts and building permits for March slid more than expected. The silver lining of the housing starts number is that it helps reduce the inventory of homes on the market, such that when the housing market turns higher, demand could quickly outstrip supply, given the growth demographics of our country.

Asian markets were mixed overnight. Reports out of China showed that GDP for the country grew +6.1% last quarter, below expectations and the slowest pace in the last decade. Given that other reports show that power consumption in China declined last quarter, I think these official GDP figures could be overstating actual growth. Such is China.

The dollar is mixed this morning, while gold is trading lower, and oil prices are roughly flat; the 10-year yield is higher at 2.79%, halting a 3-day slide; and the VIX is barely higher at 36.50, after closing at a new low for the year yesterday. The downtrend in the VIX is encouraging.

Trading comment: This market sure doesn't want to go down for long. That's a sign that people remain underinvested, and in the case of big quant hedge funds, I'm hearing that they continue to short the market and have not participated in the recent rally.

I took partial profits on our real estate etf (IYR) yesterday, and trimmed a bit of our Google (GOOG) positions ahead of earnings tonight. If the S&P 500 rallies more today, I may also trim some of our SSO position. That's just profit taking.

The SPX continues to find support along its uptrend line that has been in place since the March lows. I'll post this chart later, but the correction won't begin until this trend line first gives way.



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