Sam Collins

The Long Road Ahead

by Sam Collins   04/24/08

More than 113 companies reported earnings yesterday, and many before the opening. So when the opening bell rang, many traders acted like deer in headlights as they tried to absorb the overwhelming flow of data coming from every corner of the globe.

As the information began to sink in, the market rallied and by 11 a.m. Eastern, it was positive by about 75 Dow (DJI) points. But after more companies reported around noon, the wind went out of the sails and by 12:30, the DJI stood at about 15 points down.

Boeing (BA) announced its Q1 results early, in fact around 10 a.m. Eastern, but it wasn't until analysts ripped into the minutiae that many absorbed the excellent report from the airplane manufacturer. Analysts expected $1.31 per share but instead were treated to a 38% jump in the quarter, which worked out to a profit of $1.62 a share.

Other gainers included VMware (VMW), which had a strong Q1 and projected a strong year, as well as Broadcom (BRCM), EMC Corp. (EMC), Philip Morris International (PM) and Yum! Brands (YUM), which all topped estimates.

Financial stocks, however, had another rocky day with massive losses at Ambac Financial (ABK). And even though UPS (UPS) met expectations it projected a cautious outlook.

At the final bell, the Dow Jones Industrial Average (DJI) had gained 43 points at 12,763. The S&P 500 (SPX) was up four points, closing at 1,380, and the Nasdaq (NASD) led again, up 28 points (1.19%) to 2,405.

Volume on the New York Stock Exchange was just over 1.5 billion shares, and on the Nasdaq (NASD), 909 million shares had traded -- gainers were slightly ahead of decliners on both exchanges.

Despite an Energy Department report that showed crude oil inventories rose by 2.4 million barrels in the week ending April 18, crude oil prices for June delivery rose 23 cents to $118.30 a barrel. The Amex Energy SPDR (XLE) rose by 4 cents to $84.58.

Gold futures sagged again as the dollar climbed -- the June gold contract fell $16.20 to $909 per troy ounce and the PHLX Gold/Silver Index (XAU) settled at $179.38, down $6.43.

What the Markets Are Saying

With two higher highs and three higher lows, the Dow Industrials (DJI) have established a short-term channel uptrend, and the Dow is knocking on the door of the major resistance zone that begins at 12,800 for about 1,000 points. Volume increased slightly yesterday but is still not at the levels associated with a major breakout, and breadth has been flat -- that, too, is not supportive of further major advances.

As for the internal indicators: Both the slow and fast stochastic signals are overbought, as is the Moving Average Convergence/Divergence while momentum has turned flat.

All of this supports a slow and plodding path into the resistance and many weeks, and perhaps even several months, of struggle before we have a shot at a major breakout into new highs. However, the positive side of this outlook is that the market appears to be forming a base that should give patient investors an opportunity to pick up undervalued gems that will provide solid returns for the longer term.

Today's Trading Landscape

Between yesterday's close and today's opening, around 213 companies will report earnings. So far among them, the following major names have reported: Apple (AAPL), with a jump of 36% in profits as its fiscal Q2 beat estimates but forecasts lower-than-expected earnings for fiscal Q3; Amazon.com (AMZN) gave Q1 earnings that jumped 30% and beat estimates by a penny but it, too, lowered forecasts; and Qualcomm (QCOM) whose fiscal Q2 profit rose 5.5%.

Here are others that will report today:

1-800-Flowers (FLWS), 3M Company (MMM), A.T. Cross (ATX), ABB (ABB), Affymetrix (AFFX), Alaska Air (ALK), Altria Group (MO), America Movil (AMX), American Electric Power (AEP), American Express (AXP), American Financial Group (AFG), AmeriCredit (ACF), Amgen (AMGN), Applied Biosystems (ABI), Applied Industrial Technologies (AIT), AstraZeneca (AZN), AutoNation (AN), Avid Technology (AVID), Avnet (AVT) and AVX Corporation (AVX).

Baidu (BIDU), BASF (BASFY), Bayer (BAYRY), Belden (BDC), Benchmark Electronics (BHE), Black & Decker (BDK), Bristol-Myers Squibb (BMY), Brunswick (BC), Bucyrus (BUCY) and Bunge (BG).

Canon (CAJ), Cash America (CSH), Century Aluminum (CENX), Chemed (CHE), Chubb (CB), Cohu (COHU), Columbia Sportswear (COLM), Compania de Telecomunicaciones de Chile S.A. (CTC), ConocoPhillips (COP), Consol Energy (CNX), Cooper Industries (CBE), Credit Suisse (CS), Curtiss-Wright Corp. (CW) and Deckers Outdoor (DECK).

Deluxe Corp (DLX), DeVry (DV), Diamond Offshore Drilling (DO), Dover Downs Gaming & Entertainment (DDE), Dover Motorsports (DVD), Dow Chemical (DOW), EarthLink (ELNK), Eastman Chemical (EMN), Ecolab (ECL), Electronic Data Systems (EDS), EMCOR Group (EME), Emulex (ELX), Ensco (ESV), Exelon (EXC) and EZCorp (EZPW).

Federated Investors (FII), Fidelity National Information (FIS), FLIR Systems (FLIR), Fortune Brands (FO), Foundry Networks (FDRY), Franklin Resources (BEN), Friedman Billings Ramsey (FBR), Gateway Financial Holdings (GBTS), Genworth Financial (GNW), Goodrich (GR) and Hub Group (HUBG).

IKON Office Solutions (IKN), Imation (IMN), ImClone Systems (IMCL), Ingram Micro (IM), Insituform Technologies (INSU), Interactive Data Corporation (IDC), Interwoven (IWOV), Invesco Ltd. (IVZ) and ITT Educational Services (ESI).

Janus Capital Group (JNS), Juniper Networks (JNPR), Kansas City Southern (KSU), Kennametal (KMT), KLA-Tencor (KLAC), KT Corp. (KTC), Kulicke & Soffa (KLIC), Kyocera Corp (KYO), L-3 Communications Holdings (LLL), Laboratory Corp. of America (LH) and Life Time Fitness (LTM).

MDC Holdings (MDC), Massey Energy (MEE), McAfee (MFE), MEMC Electronic Materials (WFR), Merit Medical Systems (MMS), Microsoft (MSFT), Microvision (MVIS) and Motorola (MOT).

Nash Finch (NAFC), Newell Rubbermaid (NWL), Newmont Mining Corporation (NEM), Newfield Exploration (NFX), Northrop Grumman (NOC) and Nova Chemicals (NCX).

Occidental Petroleum (OXY), Old Republic (ORI), Packeteer (PKTR), PepsiCo (PEP), Performance Technologies (PTIX), PerkinElmer (PKI), Phase Forward (PFWD), Pixelworks (PXLW), Pool Corp. (POOL), Potlatch (PCH) and ProLogis (PLD).

Rambus (RMBS), Raytheon (RTN), Regal Entertainment (RGC), Roper Industries (ROP), Royal Caribbean Cruises (RCL), Safeway (SWY), SiRF Technology Holdings (SIRF), Southwestern Energy (SWN), Starwood Hotels (HOT), Sterling Bancorp (STL), Suncor Energy (SE) and Sybase (SY).

T. Rowe Price (TROW), Tennant Co. (TNC), Tenneco (TEN), Terra Industries (TERA), The Cheesecake Factory (CAKE), The Dow Chemical Company (DOW), The Hershey Company (HSY), The Stanley Works (SWK), Travelers (TRV) and Thermo Fisher Scientific (TMO).

Union Pacific (UNP), Universal Health Services (UHS), Urologix (ULGX), US Airways Group (LCC), Varian Semiconductor Equipment (VSEA), Western Digital (WDC), Whirlpool (WHR), YRC Worldwide (YRCW) and Zimmer Holdings (ZMH).

The following economic reports are due: Initial jobless claims (the consensus expects 3,000), March durable goods orders (the consensus expects 0.6% growth), the DJ-BTMU Business Barometer, the March Help-Wanted Index and March new home sales (the consensus expects a 2.5% drop).

Today is the biggest so far for earnings reports -- there are some early surprises: Credit Suisse (CS) said that it swung to a worse-than-expected Q1 loss after taking a $5.2 billion write-down for buyout loans and mortgage securities. Aetna (AET) posted profit and revenues above forecasts. Potash's (POT) Q1 net nearly tripled and it beat estimates by 21 cents.

Dow Chemical's (DOW) Q1 results were 99 cents versus a 94-cent estimate. Bunge (BG) upped 2008 guidance and reported $2.10 per share versus an estimate of $1.14. Starbucks (SBUX) lowered its Q2 and full-year outlook. Ford (F) was expected to report a loss of 16 cents a share for Q1 and instead posted a profit of 5 cents.

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