by Sam Collins 04/29/08
The key word yesterday was "caution!" while investors hesitated as the major indices approached the huge overhead accumulated since April of last year. With the Federal Open Market Committee (FOMC) meeting looming and 55% of all Q1 earnings announced, the focus is turning more to economic reports and policy than to earnings.
But there were some interesting developments with stocks: The deadline for Microsoft's (MSFT) "cut bait or fish" ultimatum to Yahoo! (YHOO) came and went and now we will see whether Mr. Softie is going to play hardball and go for a hostile bid.
Mars and Warren Buffett's Berkshire Hathaway announced an agreement to buy Wrigley (WWY) for $80 a share. And another big entrepreneur, Kirk Kerkorian, through Tracinda, said that he would offer to buy up to 20 million shares of Ford (F) for $8.50 a share.
So, after a lackluster session, the Dow Jones Industrial Average (DJI) closed at 12,872, off 20 points. The S&P 500 (SPX) was down a point at 1,396, and the Nasdaq (NASD) rose a point to close at 2,424. The New York Stock Exchange traded 1.2 billion shares, with advancers just slightly ahead of decliners. On the Nasdaq (NASD), 747 million shares crossed and advancers were in the lead by 7-to-6.
Crude oil prices (June contract) again set a new intraday high near $120 a barrel and closed at $118.75, up 23 cents, due to a strike by U.K. pipeline workers. The Amex Energy SPDR (XLE) fell 14 cents to $82.74.
Gold for June delivery gained $5.80 to $895.50 per troy ounce in sympathy with the new high in crude oil prices, and the PHLX Gold/Silver Index (XAU) fell $2 to $174.06.
What the Markets Are Saying
With more than half of the S&P 500 (SPX) holdings having reported Q1 earnings, it is clear that the quarter is turning out to be somewhat better than expected, with aggregate earnings up better than 11%. Further, the S&P's 12-month forward price-to-earnings ratio is just under 15 times.
But the market is hesitating to grab the moment and charge into the resistance zones that I've so often outlined -- why?
Clearly, investors are concerned about many things: the Fed's direction with regard to interest rates, the lack of clarity from major corporations regarding Q3 and Q4 estimates, the impact of the president's stimulus plan, daily highs in crude oil, a sudden drop in consumer confidence, a continuing lack of liquidity in the financial markets, falling home prices, and an inflation number by the government that nearly everyone believes is inaccurate.
Zounds! I've asked the wrong question -- instead of "Why isn't the market going higher?" perhaps the real question is "Why isn't it heading lower?" And that's why I'm just a bit more bullish than bearish.
Even with all of the negatives, the market is pounding on the door of a breakout -- in other words, it is treating bad news as if it were good, and that's usually the mark of a bull market in the making.
Today's Trading Landscape
Earnings to be reported today include:
AM Castle (AM), Acadia Realty Trust (AKR), Accuray (ARAY), ACE Limited (ACE), Actel (ACTL), Advent Software (ADVS), Aftermarket Technology (ATAC), AGCO (AG), Align Technology (ALGN), American Campus Communities (ACC), Angiotech Pharmaceuticals (ANPI), Archer Daniels Midland (ADM), ArvinMeritor (ARM), Ashland (ASH), Associated Estates Realty (AEC), AudioCodes (AUDC) and Avon Products (AVP).
Baldwin Technology (BLD), Ballard Power Systems (BLDP), Banco Bradesco S.A. (BBD), Belo (BLC), Bemis Co. (BMS), Berkshire Hills Bancorp (BRKA), Berry Petroleum (BRY), Boston Properties (BXP), Boyd Gaming (BYD), BP Plc (BP), BRE Properties (BRE), BTU International (BTUI), Buckeye Gp Holdings (BGH), Buckeye Partners (BPL), Buffalo Wild Wings (BWLD) and Burlington Northern Santa Fe (BNI).
Carpenter Technology (CRS), CB Richard Ellis Group (CBG), CBS Corp (CBS), CEVA Inc. (CEVA), CGI Group (GIB), Community Health Systems (CYH), Conexant Systems (CNXT), Convergys Corp. (CVG), Corning (GLW), Countrywide Financial (CFC), Cray (CRAY), CTS Corp. (CTS) and Cybersource (CYBS).
Daimler AG (DAI), DaVita (DVA), Denny's (DENN), Deutsche Bank (DB), DiamondRock Hospitality Co (DRH), Dice Holdings (DHX), Domino's Pizza (DPX), Double-Take Software (DBTK), DreamWorks Animation SKG (DWA), Eagle Test Systems (EGLT), Echelon Corp. (ELON), Embarq Corp. (EQ), Energizer (ENR), Entertainment Properties Trust (EPR), Equity One (EQY) and Express Scripts (ESRX).
Flextronics (FLEX), Franklin Street Properties (FSP), Fresh Del Monte Produce (FDP), General Cable Corp. (BGC), General Growth Properties (GGP), Genesee & Wyoming (GWR), Gevity (GVHR), Glatfelter (GLT), Global Crossing (GLBC), GMAC LLC (GJM), Group 1 Automotive (GPI) and Guaranty Financial Group (GFG).
Hanmi Financial (HAFC), Harris (HRS), Healthspring (HS), Hutchinson Technology (HTCH) and Idenix Pharmaceuticals (IDIX).
Key Tronic Corp. (KTCC), Keynote Systems (KEYN), Korea Electric Power (KEP), K-Swiss (KSWS), LandAmerica Financial Group (LFG), Landauer (LDR), LCA-Vision (LCAV), Lear Corp. (LEA), Lincoln National (LNC) and Lumber Liquidators (LL).
Magnetek (MAG), Martha Stewart Living Omnimedia (MSO), Masco (MAS), MasTec (MTX), MasterCard (MA), Medco Health Solutions (MHS), Midwest Banc Holdings (MBHI), Mueller Water Products (MWX), Nalco Holding (NLC), National Instruments (NATI), National Technical (NTSC), NCI, Inc. (NCIT), NetLogic Microsystems (NETL) and Nexen (NXY).
Office Depot (ODP), Oil States International (OIS), Panera Bread (PNRA), Patni Computer Systems (PTI), Patriot Coal Corp. (PCX), PDF Solutions (PDFS), Penske Automotive Group (PAG), Perot Systems (PER), Pinnacle West Capital Corp. (PNW), Planar Systems (PLNR) and Plantronics (PLT).
Quaker Chemical Corp (KWR), RadiSys Corp. (RSYS), RenaissanceRe Holdings (RNR), Rogers Communications (RCI), Semiconductor Manufacturing Int'l (SMI), Sierra Wireless (SWIR), Silicon Motion Technology Corp. (SIMO), Silicon Storage Technology (SSTI), Simon Property Group (SPG), Sonic Automotive (SAH), SonicWALL (SNWL) and Spirit AeroSystems Holdings (SPR).
Taiwan Semiconductor Manufacturing (TSM), TECO Energy (TE), Teleflex (TFX), Temple-Inland (TIN), Teppco (TPP), The Dixie Group (DXYN), The Scotts Miracle-Gro Company (SMG), Titan International (TWI), Trane (TT), Trinity Biotech (TRIB"/>TRIB), True Religion Apparel (TRL) and Tuesday Morning (TUES).
Under Armour (UA), United Rentals (URI), United States Steel (X), USEC Inc. (USU), Valero Energy (VLO), Vishay Intertechnology (VSH), Waste Management (WMI), Watts Water Technologies (WTS) and Wisconsin Energy Corp. (WEC).
The following economic reports will be delivered today: the International Council of Shopping Centers (ICSC) Chain Store Sales Index, Redbook Retail Sales Index, February Standard & Poor's/Case-Shiller Home Price Index (the consensus expects a 12% drop year-over-year), April Conference Board Consumer Confidence and the ABC/Washington Post Consumer Confidence.
Consumer confidence will be in focus today as the Fed considers whether to cut interest rates by 25 basis points at the FOMC meeting tomorrow.
Archer Daniels Midland (ADM) beat fiscal third-quarter estimates by 10 cents. Deutsche Bank (DB) reported its first quarterly loss in fives years on write-downs, and Allianz (AZ), a German insurer, expects to have $1.4 billion in write-downs in its Q1. Visa (V), in its first quarterly report since going public, said net income was up 28% in its fiscal second quarter.
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