Wednesday, January 23, 2013

A Nice Start To Earnings Season

The markets are mixed this morning after closing near their highs yesterday and marking a 5th consecutive up day for the market.  Earnings season really kicks into high gear this week, and so far we are seeing some nice positive reactions.

The big winner on the Nasdaq is Google (GOOG), which beat EPS estimates and showed some solid growth metrics.  The stock is up nearly 6% this morning near the $750 level.  Another large growth stock that beat earnings and is 10% higher today is Intuitive Surgical (ISRG).

The big winner in the Dow is IBM which is up 5% and back above the $200 level ($206).  The big disappointment of the day is Coach (COH), which missed earnings estimates.  Revenues and margins were also a bit light, and comp store sales were negative.

Stocks rising on earnings: GOOG, ISRG, IBM, CSX, UTX, WLP, SAP

Stocks falling on earnings: COH, GD, VIVO, MOLX, DGX, PX

The House of Reps is set to vote today on a bill aimed at extending the debt ceiling until May.

Asian markets were mixed overnight.  Japan was lower by -2.1% while China was 0.3% higher.

Europe is also mixed this morning.  The Bank of Spain said that Q4 GDP contracted -1.7%.

The dollar is higher today, and commodities are mostly lower.  Oil prices are flattish near $96.50 and gold prices are a bit lower to $1690.

The 10-year yield is a bit lower to 1.81%.  And the volatility index is still very lower near 12.57.

Trading comment: With the S&P 500 up 5 days in a row, we are due for a down day.  But the reactions to the earnings reports of the large growth stocks highlighted above is encouraging.  Tonight AAPL reports earnings, and we are really hoping for a positive reaction in the stock as well.  The selloff has been pretty relentless the last several months as portfolio managers and hedge funds all scrambled to reduce their positions at the same time.  Hopefully that has run its course and the earnings report will be a catalyst for the stock.  Away from AAPL the market remains short-term overbought but I wouldn't be surprised to see the same sort of sideways consolidation take place that we have seen recently.  Nothing like higher prices to make folks more bullish about stocks.

KAM Advisors has long positions in AAPL, COH, GOOG, IBM


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