Wednesday, January 22, 2014

Earnings Season Heats Up With More Mixed Results

There is no real tone to discern from earning season.  Overall, I would say we have seen more disappointments from big companies that positive reactions.  But we still have several bellwethers left to report.

This morning the Dow is down again as its second biggest component IBM is trading lower after reporting earnings.  Semis are higher after positive reactions in TXN and XLNX.  Retailers are being weighed on by disappointing results from Coach (COH).

There aren't any economic reports moving the market today.  Treasury prices are a bit lower and that has yields on the 10-year Note up to 2.84%.

Commodities are mixed with oil prices higher again to $96.30 and gold prices slightly weak around $1239.

The volatility index is up a bit to 13.08, which is still a very low absolute level.

Stocks rising on earnings: ZION, XLNX, TXN, HURN, TXT, UTX, VMW, NTRS, EAT, NSC

Stocks falling on earnings: IBM, COH, ABB, MSI, ATI, STJ, PH, ABT, FCX, APH, PGR

Asian markets closed higher overnight.  The Bank of Japan made no changes to its monetary policy.  Europe's markets are lower today.  Great Britain's unemployment rate fell to 7.1% from 7.4%.  It now stands just 0.1% above the threshold that the Bank of England has stated for tightening policy.

Trading comment: The lackluster earnings reports we have seen so far have done little to cause a correction in the market, despite the fact that the market came into the new year quite overbought and with investor sentiment very high in complacency.  The S&P 500 finished 2013 at 1848 and this morning it sits at 1843, not far from its recent highs.  This sideways consolidation was the hallmark of trading last year, and so far the pattern looks similar.  The longer we trade sideways like this the closer we think the markets are to another breakout to new highs.  So right now it looks too early to get defensive, even though we do expect the overdue correction in stocks to emerge at some point this quarter.

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