The hype may have been all about earnings, but the action (or
lack of same) was all about more surprises from the SEC.
On the earnings front: United Technologies (
) jumped 3.7% after reporting a 20% gain in earnings and beat
estimates by 3 cents. Apple (
) rocketed 6% higher following Tuesday's after-the-close earnings
of $3.33 against an expected $2.54. Boeing (
) and Lockheed Martin (
) both closed higher on better-than-expected earnings.
But all was not well in the health care sector despite earnings
gains by some key stocks. Stryker (
), St. Jude Medical (
), Abbott Laboratories (
) and Gilead Sciences (
) all reported better earnings, and ABT and GILD beat estimates.
However, the sector closed with a 1.8% loss.
Goldman Sachs (
) fell again despite a report from CNBC that the SEC has testimony
that refutes the fraud charges levied against the firm. The Dow's
financial components fell on concerns that the SEC investigation
could expand to include other firms.
At the close, the Dow Jones Industrial Average (
) rose 8 points to 11,125, the S&P 500 (
) fell a point to 1,206, and the Nasdaq (
) added 4 points to close at 2,506.
The NYSE traded 1.2 billion shares with advancers over decliners
by 5-to-4, and the Nasdaq crossed 740 million shares with advancers
ahead by 7-to-6.
What the Markets Are Saying
As our readers know, I have been mildly bullish for months, but
my optimism is now being pushed to its limit by the myriad of
"extremely overbought" signals coming from the sentiment
Just before writing this report, I was scanning the recent
Advisors Sentiment numbers from the respected weekly service,
Investors Intelligence (
). II is generally conservative, waiting until their indicators are
very much in one direction or the other before registering a change
in direction. Yesterday, they warned that their advisory sentiment
index is very bullish -- a strong negative. The index should be
viewed as a "contra-indicator," which means that very bullish is
bad and very bearish is good.
They said that even though prices could move higher, a reading
of 53.3% bullish reaches a danger level. The last reading this high
was at the end of the first week of January at 53.4%, and that led
to a 9% correction in the market. And I would add that many stocks,
especially some of those that had made the biggest moves late last
year, were hit by double-digit declines.
S&P's Mark Arbeter (who has been bearish for the past six
weeks) may have jumped the gun, but he correctly points out that
the gains made since late February have generally averaged less
than 1% per day for the major indices. These gains, which have
taken weeks to achieve, could be wiped out in just a day or two of
Mark confirms that virtually all of his indicators are now
"extremely overbought," and points to the CBOE equity-only put/call
ratio, which in the past 12 days is the "most overbought" in 10
I could go on to list the many sentiment and internal indicators
that I follow that are in the dangerously overbought area, but I'll
spare you the repetitious detail. However, there is one
"seat-of-the-pants" indicator that comes from my many years of
watching markets, that is almost always predictive, and that is the
contra behavior of the markets to news.
As long as the market acts in the direction of the news, whether
good or bad, the threat of a reversal is small. But when markets
ignore good news and either go down or sideways, watch out. During
the last few days, as we approach the peak of the Q1 earnings
season, earnings from the best and biggest companies have been
spectacular and the market's reaction has been lukewarm. And
yesterday, we saw the same pattern with Apple, Boeing, UTX and
Lockheed Martin all knocking the cover off of the earnings melon
with the markets barely holding on to a gain.
So watch out. If the market can't make new highs when companies
are reporting the most impressive earning gains in years, then
buyers have already discounted those gains. The stock market is now
very vulnerable to any unexpected bad news. And when the bad news
hits, it will hurt.
Today's Trading Landscape
Earnings to be reported before the opening
Air Products, Alaska Air, Alexion Pharmaceuticals, American
Greetings, AmerisourceBergen, Applied Industrial, Arbitron,
AutoNation, Baxter, BB&T Corp., Blackstone, Briggs &
Stratton, Cabot Microelectronics, Cash America, Celestica,
Continental Airlines, Cooper Industries, Cypress Semiconductor,
Danaher, Deluxe, Diamond Offshore, Ensco, Fifth Third, GATX,
Gentex, Goodrich, Hershey Foods, Hubbell, InSteel Industries,
Invacare, ITT Educational, JAKKS Pacific, Janus Capital, Kensey
Nash, Kimberly-Clark, KVH Industries, L.B. Foster Co, L-3
Communications, Life Time Fitness, LSI Industries, Marriott,
McClatchy, MKS Instruments, New York Times Co., Nokia, Nucor, Old
Republic, Peabody Energy, Penn National Gaming, PepsiCo, Philip
Morris International, PNC Financial Services Group, Pool Corp.,
ProLogis, Provident Financial, Raytheon, Reliance Steel, Rimage,
Sherwin-Williams, Sigma-Aldrich, Sonoco Products, Southwest
Airlines, Sterling Bancshares, Sybase, TCF Financial, Tennant,
Textron, The Inventure Group, TradeStation, Ultratech, Umpqua
Holdings, Union Pacific, USA Truck, Verizon, Watsco, Webster
Financial, Wesco, WNS and Zimmer Holdings.
Earnings to be reported after the close include:
Acacia Research, Advanced Energy, Align Technology, Amazon.com,
Amdocs, American Express, AmSurg, Arthur J. Gallagher, Avid
Technology, BancorpSouth, BJ's Restaurants, Bucyrus, Builders
FirstSource, C.R. Bard, Capital One, Cepheid, Cheesecake Factory,
Chubb, CoBiz, Columbia Sportswear, Computer Programs & Systems,
Cybex, Cymer, Cypress Sharpridge Investments, Cytec, Deckers
Outdoor, Developers Diversified Realty, DeVry, Digi International,
Eastman Chemical, Education Realty Trust, EZCORP, Federated
Investors, First Financial, Hawaiian Holdings, Healthways, Hittite
Microwave, Informatica, Interactive Brokers, International Game
Technology, J&J Snack Foods, Lattice Semiconductor, Local.com,
Matthews, Micrel, Microsemi, Microsoft, NCR Corp., OSI
Pharmaceutical, PC-Tel, PMC-Sierra, Premiere Global Services,
Rambus, Riverbed Technology, Rocky Brands, RSC Holdings,
STMicroelectronics, SVB Financial Group, Synaptics, Taubman
Centers, Western Digital, Wipro and Woodward Governor.
Economic reports due:
producer price index (the consensus expects 0.4% and 0.1% ex-food
and energy), jobless claims (the consensus expects 460,000),
existing home sales (the consensus expects 5.25 million), FHFA
House Price Index, EIA natural gas report, Fed balance sheet and
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