Getting Ready For Earnings Season

Markets are higher again in early trading, taking their positive cues from overseas markets.

There hasn't been much in the way of market moving news this morning.  There was no real economic data released, and the only big earnings report last night was Alcoa, which is trading down a bit today but isn't a big market mover.

IBM was downgraded this morning which is holding back the Dow a bit relative to the S&P 500.  Separately, ISRG lowered its guidance and that former growth darling is down $85 (-17%) today.

On the upside, FedEx is up 7% this morning and boosting transport stocks.  There is some speculation of a big investment from Bill Ackman, but it hasn't been substantiated.

Asian markets were higher overnight.  Chinese CPI showed a year-over-year gain of 2.7%, which was above expectations.  A State researcher said that Chinese GDP in Q2 might be below the 7.5% target.

Europe's markets are also higher.  An ECB member said that their bank mechanism could recapitalize banks if needed, and also that another LTRO program could be possible.  In Portugal, the deputy prime minister said conditions for meeting the terms of the bailout agreement are in place.

The dollar is higher again and commodities are mixed.  Oil prices are lower near $102.90 and copper prices are down also.  But gold is higher to $1248.  Silver and ag prices are higher also.

The 10-year yield is easing back a little more to 2.62%.  Bernanke is set to speak later this week, which could add to the recent volatility in bond yields.

The volatility index has moved below the 15 level to 14.28 right now.  This is good news for the bulls and increases the likelihood that this rally could last.

Trading comment: The S&P 500 is adding to its distance above its 50-day average.  It is now very close to testing the June highs at 1654.  Volume hasn't been anything to write home about on this latest advance, but that has been the story for awhile now.  Earnings season starts to pick up this week, so it's risky to add to new stocks or existing positions ahead of earnings reports as this earnings season could contain more surprises than recent quarters.  Expectations have been ratcheted down in terms of what kind of earnings growth we are going to see overall.  But hopefully that has lowered the bar to some extent.

KAM Advisors has long positions in IBM, FDX