Stocks Try To Close Out Week On A Positive Note

The markets are higher in early trading after another batch of better than expected earnings reports and some renewed buying interest in Europe. 

Earnings reports have continued to come in fast and furious.  As I scan the reactions to earnings announcements among stocks this morning, I'm seeing a lot more positive reactions than negative ones.  Although there were some disappointments as well.

Stocks rising on earnings results include:

• MSFT, HON, GE, MCD, COF, UA, SLB, VMI, BGS

Stocks declining related to earnings:

• DLR, EXPD, CMG, SNDK, TPX, RVBD

Asian markets were mixed overnight, while Europe's markets are higher this morning.  A positive reading for Germany's business climate helped boost sentiment abroad.

The dollar is lower vs. the euro today, and that is helping commodities.  Oil prices are higher above $104, and gold prices are higher to $1645.  Copper prices are up today also.

The 10-year yield is getting a small bounce, rising to 1.99%.  But the VIX is seeing a big plunge today, down -7% to 17.0 which is just below the 50-day average.  Today is options expiration which could be exacerbating some of the trading in the options market today.

Trading comment:  The S&P 500 is currently in position to finish the week on a positive note.  But trading has been choppy, and the days when the market has been higher have not been accompanied by the usual rise in volume that the bulls look for.  In this situation, we like to focus those names that have beaten earnings and seen big pops in their stock.  Those are usually the stocks where demand will remain strong and investors can use upcoming dips and pullback in said names to add to their positions.  We don't want to bottom fish in the laggards in hopes that they play catch up.

KAM Advisors has long positions in HON, MCD, BGS, DLR, EXPD

Positive Reactions To Earnings Rolling In

The market was lower in early trading after some economic data came out that was less robust than expected.  But the positive reaction to earnings reports seems to be pulling things higher, and the markets quickly got back into positive territory.

In economic news, the Philly Fed Survey for April fell to 8.5 from 12.5 in the prior month.  Also, existing home sales fell to an annualized pace of 4.48 million units during March, but that is down from a pace of 4.60 million units last month.  Initial jobless claims for the week were also a little higher than expected.

In earnings news, we are getting into the thick of earnings seasons with lots and lots of companies reporting results. 

Stocks showing positive reactions to earnings:

• EBAY, FFIV, AXP, TRV, VZ, MS, KMP, and UNH

Stocks showing negative reactions to earnings:

• QCOM, EMC, NVE, TZOO

Overnight action in Asia was mixed, while Europe is mostly higher this morning.  The demand for the bond auctions in Spain was stronger than feared and the auctions were well bid. 

The weaker economic data is helping push yields lower, with the 10-year yield down to 1.96%.  And the VIX is lower by more than 3% so far, pushing it down to the 18 level and very near its 50-day average.

Trading comment: Earnings reports have been strong for the most part, and that will keep folks bullish about stocks.  The fears about deterioration in Europe are still present, although the solid bond auctions in Spain and France have pushed those concerns to the back burner for the moment.  But CDS prices in Germany continue to rise, so stresses remain.  I expect individual stock leaders to hold up well on a relative basis, but I do not think investors will escape the late spring and summer months without a pickup in volatility.

KAM Advisors has long positions in KMP, EMC, QCOM, UNH, and VZ

POSSIBLE PORTFOLIO CHANGE

A potential portfolio change has been posted to the website.

How Long Can U.S. Markets Igonre Spain?

The markets are slightly lower in early trading after a surprisingly strong rally yesterday. I was surprised by the strength of the rally yesterday, given that bond yields are rising in Spain, CDS prices have been rising across the eurozone, and comments from the IMF have highlighted the deteriorating situation in peripheral Europe. I wonder how long our markets can ignore this news?

But don't let me rain on anyone's parade. Asian markets were up across the board overnight, following the strong rally here yesterday. But Europe is lower again this morning, with Spain down another -3%.

In earnings news, there were a handful of companies reporting better than expected earnings. Stocks moving higher after reporting include: PNC, SYK, STX, HAL, and ISRG. IBM, INTC, and BLK also topped estimates but their stocks are lower today. I have not seen any notable stocks that are down a lot on earnings.

On the M&A front, SXCI said it will buy CHSI and its stock is up 8% on the news. Consolidation continues in the PBM industry.

The dollar is higher this morning vs. the euro, which is weighing on commodities. Gold prices are lower near $1644. Silver and copper prices are lower also. And oil prices have pulled back to $103.

The 10-year yield continues to struggle with that 2.00% level, currently at 1.98%. And the VIX is up 2% this morning after bouncing off its 50-day support yesterday (18.95).

Trading comment: Yesterday's action took the S&P 500 back above its 50-day average. I think a couple of closes above that level puts the bulls back in charge of the tape. I would also like to see a follow-through rally with some volume accompanying it to show me there is some conviction. If the SPX fades back below the 50-day, then we will be back in correction mode. The news out of Europe remains troubling, and I am trying to be mindful for the potential of another flare up like we had last summer with Greece. But the market continues to climb the proverbial wall of worry.

KAM Advisors has long positions in HAL, IBM, and SXCI

One-on-One with Governor Mitt Romney

In my latest interview with former Governor Mitt Romney, he emphatically defends his own business success against Obama’s class warfare/Buffett Rule/Romney Rule attacks. Don’t look for Mitt to back off from his free enterprise vision.

He also told me he will go after HUD and DOE for budget cuts and consolidation, along with a slew of other agency cuts. He will also roll back tax deductions for upper-earners while he lowers marginal rates by 20 percent across-the-board. He does not want more stimulus from the Fed. Thinks blaming speculators for high energy prices is completely wrong.

He would roll up his sleeves to deal with taxmageddon immediately during his transition if elected. And wants his Veep to be able to lead the country as president if that were necessary. He believes women can meet that requirement as well as men. Take a listen:

PORTFOLIO CHANGE

A portfolio change is been posted to the website.

Can Bulls Keep Their Foot On The Gas?

The market is rallying in early trading as the bulls try to keep this correction short in nature. Market leader AAPL has plunged over the last few days but today it is reversing higher and is currently up 3% on the session trying to recapture the $600 level.

In earnings news, there were some positive reports from bellwethers such as Coke (KO), Goldman Sachs (GS), and JNJ. All of those companies beat earnings estimates and their stocks are higher so far.

Asian markets were mostly lower overnight, led by China (-1.0%) after it announced that foreign direct investment fell 2.8% yr/yr. India was higher last night after the Reserve Bank of India cut its overnight rate in a surprise 50 bps cut to 8.00%.

Europe's markets are all higher this morning after strong demand for Spain's recent bond offering. This is no doubt helping sentiment in the U.S, where concerns over Spain have been rising. But Spain's auction of 3.2 billion euros of 12- and 18-month bills are within the maturities of the ECB's LTRO, so I don't think it's a true gauge of demand. I want to see if there is the same demand among investors when they auction new 10-year notes.

The dollar is a little lower vs. the euro, and commodities are mixed. Oil prices are higher near $104.70 while gold prices are slightly weaker to $1646.

The 10-year is getting a small boost back to the 2.00% level. And the VIX is plunging on this early rally, down -9% to 17.75 which is still above its 50-day average.

Trading comment: The S&P 500 closed back below its 50-day last night, and looked like that would lead to a deeper correction. But this market likes to keep investors on their toes and leaning the wrong way, so this morning it has shot back above that 50-day average. This is a battleground right now, and if the SPX can log a couple of closes above it (1377) I would have to give the benefit of the doubt to the bulls. We added to our shorts and hedges in recent days, and those positions will have to be reconsidered if this strength continues. But something tells me it might not be that easy.