Wednesday, April 14, 2010

Intel, JPM Get Earnings Season Off To A Strong Start

The market is nicely higher again this morning, overbought readings be damned, on the heels of some solid economic data and a strong start to earnings season from two bellwether companies.

I said yesterday that I would rather consider Intel (INTC) as the start to earnings season, and they came through with flying colors. The chip giant reported a very strong quarter, with EPS of $0.43 vs. $0.38 consensus. Gross margins were also well above estimates, and the company guided revenues for next quarter higher.

This led to a wave of buying in the tech sector. Specifically, the chip index (SOX) is leading the way, gaining +3.42% so far.

This morning, JPMorgan (JPM) was the first big bank to announce earnings, and they too topped estimates handily, reporting $0.74 vs. $0.64 consensus. Revenues were also better than expected. The bank index (SOX) is the second leading index today, gaining +2.73% in early trading.

We also had a couple of solid economic reports hit the wire. Advance retail sales for March increased +1.6% (vs. +1.2% estimate). Also, the CPI for March rose less than expected at +0.1%, while the core CPI (excluding food & energy) was flat. Year-over-year, core CPI rose a scant +1.1%.

The strong earnings reports and solid economic data have helped push the S&P 500 Index above the 1200 level for the first time since October 2008. Of course, there are a ton of earnings reports still to come, and INTC and JPM have set the bar pretty high. I would not be surprised to see some companies' stocks sell off on earnings reports that do not beat the estimates.

The dollar is lower today, and that is helping commodities. Oil is back above $85, and gold has regained the $1156 level.

Asian markets were higher overnight; the 10-year yield is also higher to 3.82%; and the VIX is down -2.65% to 15.77.

Trading comment: The put/call ratios were low yesterday, so I still worry about sentiment in here. But these strong earnings reports likely caused a wave of short-covering and more buying on the part of institutions. Topping the 1200 level is significant for the S&P 500, but I would suspect that these gains need to be consolidated before further upside progress can be made.


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