Thursday, July 19, 2012

Investors In Forgiving Mood With Earnings

The markets are higher across the board this morning after most companies reporting earnings are seeing strong positive reactions in their stocks.  Global markets have also been higher last night and this morning as the eurozone concerns seem to be taking a back seat for the time being.

Asian markets were up across the board overnight on speculation of another reserve requirement ratio cut in China.  And in Europe markets are all higher despite yields on the Spanish 10-year climbing back to the 7.00% mark.  We've seen this movie before where Europe seems to fall out of the conversation for a short time and then one day you come in and its back on the front burner in a hurry.

In earnings news, there are way more stocks rising than falling after reporting.  It seems that even in-line earnings have been met with positive reactions, while beat and raises are seeing very strong moves.

Stocks rising on earnings: YUM, COF, FCX, UNP, VFC, PM, FFIV, IBM, QCOM, EBAY, and the big one MLNX

Stocks falling on earnings: MS, SYK, UNH, GHL

In economic news, jobless claims came in higher that last week at 386,000.  Existing home sales also disappointed at 4.37 million units for June which was down from the prior month.  The Philly Fed survey rose to -12.9 for July from -16.6 last month, but this is still a pretty weak reading.

The dollar index is higher today, but it doesn't seem to be hurting commodities.  Oil prices are higher near $92.10 (also Iran concerns) and gold prices are rallying to $1590.  Copper and silver prices are higher also.

The 10-year yield is barely moving, stuck at that 1.50% level.  And the VIX is falling further, now below the 16 level to 15.90.  I still think protection is being priced pretty cheap.

Trading comment: I am surprised by how strong the positive reactions to earnings are.  As more stocks continue to break out I might look to add some long exposure to portfolios.  The SPX has broken above its earlier July highs, and the next resistance doesn't look to come into play until we get above 1400 (around 1415).  Summer rallies are rare, and I think this latest move has caught a lot of investor flat footed.  The quality of this rally still isn't great, but it's slowly improving so I don't want to be blind to giving stocks the benefit of the doubt.

KAM Advisors has long positions in IBM, QCOM, PM, VFC, YUM


Post a Comment

<< Home