Tuesday, January 29, 2013

More Companies Issuing Cautious Guidance

The market is mixed in early trading with the S&P 500 up slightly but the Nasdaq down a little.  As I looked over the stocks of companies that reported earnings last night and this morning I see more negative reactions than we saw last week.  While many of these companies beat bottom line estimates, a fair amount either missed on the top line or issued cautious guidance.

Stocks rising on earnings: PFE, VLO, DHI, LLY, CIT, MSTR

Stocks falling on earnings: VMW, IDXX, F, EDU, ITW, EMC, TROW, HRS, ASH

In economic news, the Case-Shiller home price index for November rose 5.5%, another positive datapoint for the housing market.  But the latest consumer confidence index came in lower at 58.6 vs. last month's reading of 66.7.

Asian markets were mostly higher overnight.  The Reserve Bank of India cut rates 25 basis points to 7.75%.  China closed +0.5% higher and is now up 20% from the December lows, enough to qualify for a new bull market.

Europe's markets are mostly lower today.  Spain reported disappointing retail sales of -10.7%.  And Eurozone officials are trying to involve Russia in Cyprus' bailout.

The 10-year yield is flat near 1.98% after touching the 2.00% level yesterday for the first time in 9 months.

The VIX is lower so far just below the 13.50 level.

Trading comment: The market remains short-term overbought, but has so far been stubborn in giving investors that pullback that many are looking for.  Earnings reports have been a mixed bag and somewhat of a minefield.  We still believe the best strategy is to focus on those stocks that exhibit positive reactions to earnings and then look to buy or add to positions on pullbacks.  We don't want to chase the laggards in this environment.

KAM Advisors has long positions in VMW


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