Thursday, February 16, 2012

Financials Shrug Off Potential Moody's Downgrade

The markets are higher once again in early trading. Yesterday the market paused and gave back some ground, but it wasn't a big down day by historical standards. The market seems to be consolidating its recent gains in more of a sideways fashion as opposed to a meaningful pullback.

Today's news out of Moody's about potential downgrades in the financial sector are being shrugged off by the market. In recent months, this sort of news would have hit stocks and dragged down the financials. This goes to show how forgiving investor sentiment is currently.

In economic news, jobless claims came in better than expected for another week. And the Philly Fed survey was also better than expected coming in at 10.2 for February from 7.3 last month.

Earnings reports are a big of a mixed back this morning. While most folks focus on which companies beat or missed estimates, I like to also look at how stocks are reacting to earnings. This can give investors a good sense of how much of the prior quarter was already priced into stock prices.

Stocks rallying after reporting earnings include: GM, DUK, ASPS, and VFC. Stocks declining on earnings are: CBS, APA, MAR, CF, and WM to name a handful.

Asian markets were lower overnight, and Europe is lower today on continued concerns about Greek debt talks. The euro is also slightly lower today relative to the dollar.

Commodities are mostly lower as well. Oil prices are flattish near $101.75; gold prices are down near $1720; silver and copper prices are also lower on the day.

The 10-year yield is getting a bounce to the 1.97% level. And the VIX is down fractionally to 21.0 after a big rise in volatility yesterday.

Trading comment: Yesterday's action was completely colored by the action in AAPL. The stock is down further today, but it is now keeping the overall market down. Industrials are leading the early action, while healthcare stocks are lagging. Sector rotation continues and I still would look to add to stocks that recently gapped higher after reporting earnings if you can buy them on a dip. Those stocks should continue to lead the market.

KAM Advisors has long positions in AAPL


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