Tuesday, May 03, 2011

Enthusiasm For Earnings Reports Fading Today

Investors have been giving a pass to many companies reporting earnings, but today that no longer seems to be the case. Two of our portfolio holdings, EMR and CTSH, both reported earnings that were not near as bad as the stocks action would have you think.

EMR missed by one penny, but beat on revenues and raised guidance. The conference call isn't until this afternoon, but I think the selloff is overdone, and I am looking to add to our positions.

CTSH beat earnings by 8 cents and also raised guidance. Their financials looked great. But what I think is going is that India was down -2.4% last night after a bigger than expected rate hike by the central bank, and that is coloring the action in CTSH. I am also a buyer here on weakness.

Asian markets were mixed overnight, with India and Hong Kong lower but China higher.

The dollar was higher earlier, which helped spark some strong profit taking in commodities. Gold prices have fallen back to $1558, and oil prices are near $112.30. Let's see if oil prices stay down for the day. They have had a tendency to bounce back by the end of the day lately.

The 10-year yield continues to slowly slide, now at 3.26%; and the VIX is up 3% today to 16.46.

Trading comment: The market is overbought and lots of stocks are extended. Energy and materials stocks have been leading the market, but the last couple days seem to be signaling they need a rest. Hopefully some new sectors will step up to the plate. Financials are firm today, but they have been very unexciting lately for investors. Networking stocks also continue to pullback.

I think the market needs a little rest. Yesterday's failure to hold on to the Bin Laden relief rally supports this thesis.

long CTSH, EMR