Thursday, January 30, 2014

Stocks Bounce On Strong GDP Report

After another day of holding near the SPX 1775 levels, stocks are bouncing this morning.  The Q4 GDP report came in above expectations, and we are also seeing some positive reactions to earnings reports.

The first reading of Q4 GDP came in at 3.2%, above the 3.0% forecasts.  That shows that the economy ended 2013 with some momentum that should continue into 2014.  And as the fiscal drags sunset this year we might even start to see more readings above the 3.0% level that has been lacking most of this economic recovery.

The pending home sales report for December showed a big drop of -8.7%, but this data can be lumpy especially around year-end and holiday season.

Earnings reports continue to come in fast and furious.  This morning we are seeing more positive reactions than we have most of the week, at least anecdotally.

Stocks rising on earnings: FB, LVS, QCOM, ALXN, TMO, V, DGX, CRS, ATK, UPS, HAR, BEN, US

Stocks falling on earnings: ALGT, BEAV, MMM, ADT, SHW, DOV, MAN, XOM, POT

Asian markets ended lower.  China's HSBC manuf. PMI ticked down to 49.5, indicating the manufacturing sector is back in contraction.  HSBC said the labor market in China shed jobs at the fastest pace since 2009. 

European markets are roughly flat today.  Eurozone consumer confidence ticked higher to -12.0 from -14.0.  Spain's GDP rose 0.3% last quarter, but -0.1% vs. the year ago period.  And the Bank of England said the country's economy is making progress but still has a long way to go before a rate hike is introduced.

The 10-year yield is up near 2.71%.  Gold prices are lower today as some of the flight to quality buying from yesterday fades.

The volatility index is 5% lower today to 16.50, but the VIX is still above that 15 level which lately has meant that traders still expect some selloffs in the near term.  Below the 15 level has market periods when the market is in rally mode.

Trading comment: We are still being patient with cash that we have raised recently.  The S&P 500 has been probing for support and testing that 1775 level, but it still is trading below its 50-day average and still needs to consolidate the multi-month run-up that just ended a week ago.  But we are watching those stocks that report solid earnings and have favorable reactions in their stocks.  Those stocks could emerge as the leaders when this corrections runs its course.


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