Strong earnings from scores of companies were reported
yesterday, but like on Monday the market yawned. It is clear
that instead of earnings, investors are focused on QE2 and the
dollar.
Highlighting the many companies with excellent earnings are
Ford Motor Co.
(NYSE:
F
), which posted its sixth quarter of profit in a row. And
higher earnings than expected were also reported by
Amgen
(NASDAQ:
AMGN
),
Biogen
(NASDAQ:
BIIB
),
Bristol-Myers
(NYSE:
BMY
),
Texas Instruments
(NYSE:
TXN
),
Coach
(NYSE:
COH
) and
Johnson Controls
(NYSE:
JCI
).
Despite some early earnings surprises, a higher dollar was the
focus of the opening. In Asia the dollar rose against the yen,
and in Europe there was a rush to buy the greenback. Even
after the opening in New York, the dollar continued to rally
reaching an intraday high of 81.58 yen and $1.3831 for the euro.
The euro closed at $1.3837.
The Consumer Confidence Index for October improved to 50.2 from
48.5; expectations were for 49.0. But even with such a
surprising improvement there was little impact on the stock
markets.
And Treasurys had little effect on stocks prices. The
benchmark 10-year note fell 21 ticks, raising its yield to 2.64%,
and the 30-year Bond fell more than a point bringing its yield up
to 4.00%.
At the close the Dow Jones Industrial Average was up 5 points to
11,169, the S&P 500 was flat at 1,186 and Nasdaq rose 6 points,
closing at 2,497. The NYSE traded 965 million shares with
decliners over advancers by 1.26-to-1. Nasdaq crossed 534
million shares with decliners very slightly ahead of advancers.
What the Markets Are Saying
As noted above, there is little that is having an impact on
stock prices other than Fed news regarding QE2 and the movement of
the dollar. And this includes some of the best earnings that
investors have seen in many quarters which the market is
ignoring.
But why? The stock market has a long history of
"discounting" news. By that I mean Q3′s earnings estimates
were well known to be understated, and so when over 70% of the
S&P 500 earnings reports are "surprises" the market may have
already taken those earnings into account and priced stocks
accordingly.
But that doesn't totally account for the zero impact of
unexpectedly positive economic news, like Monday's report of better
existing home sales and yesterday's better Consumer Confidence
numbers. There is little that is more perplexing to stockholders
than a stock market that dismisses good news. And there are
few circumstances that are more disturbing, since the next reaction
may be selling in the face of good news and a reversal of
momentum.
The big question is this: Has the market already discounted
QE2? If so then the bulls may have reached a point of
exhaustion, and the next move is back down to the major support
zone at 1,130. We should know the answer to that question with
the market's response to the Fed's actions following its meeting on
next Tuesday when the governors are expected to outline the next
stimulus package. Perhaps the current lethargy is a signal
telling us to wait this out and hope that the package has more
impact than QE1.
Today's Trading Landscape
For earnings to be reported today, click here
.
Economic reports due today include: MBA Purchase Applications,
Durable Goods Orders (the consensus expects 1.6%), New Home
Sales (the consensus expects 300 K) and EIA Petroleum Status
Report.
If you have questions or comments for Sam Collins, please
e-mail him at
samailc@cox.net
.