Since peaking on January 26th, the stock market has been on a wild yet contained ride that saw the S&P 500 hit a low on February 8th, and then retested and held that same level on April 2nd.
That double bottom was the first part of a potential buy signal (see blue arrows). The other part of that signal comes with taking out previous high points where rally attempts fizzled.
That happened yesterday as the S&P 500 closed above 2,662, which means there are no technical hurdles until 2,787; from there, the charts suggest the index would be on its way to retesting its all-time high point. For the moment, we are still in a wide trading range where stocks have bounced around on the most nebulous event. Once these tempests in teapots go away, that would be the ultimate buy signal.
Under the Hood
It was a great session on Thursday, although it tempered into the close with the Dow Jones Industrial Average giving back more than 100 points. Market breadth was impressive and the best in weeks as new highs are once again edging out new lows.
The financials were big winners, powered by regional banks, including Zions Bancorp (ZION), Regions Financial (RF), and Citigroup (C), which is one of six financials scheduled to post results before the open today.
Industrial names popped, led by Deere & Co (DE), Boeing (BA), and Delta Air Lines (DA).
Technology surged without Facebook as semiconductor names Micron Technology (MU) and Nvidia (NVDA) are reigniting.
Material names, also higher, led by chemical makers.
Declines in utilities and healthcare are a positive shift away from fear and safety.
S&P 500 Index
Consumer Discretionary (XLY)
Consumer Staples (XLP)
Health Care (XLV)
Real Estate (XLRE)
Message of the Market
Thursday, stocks got a nice lift from a tweet from President Trump, suggesting a limited or even no military retaliation in Syria, which moved equity futures three hours before the opening bell.
The real fuel for the move out the gate came from corporate earnings and business news.
On the earnings front, BlackRock posted strong results and increased operating margins, which lifted overall assets under management to $6.3 trillion. Strong retail investor net flows offset an exodus of institutional investors from active investments:
- Retail +16.7 billion
- Institutional Active -$7.1 billion
- Institutional Index +10.4 billion
- iShares ETFs +34.6 billion
- Cash Management $2.7 billion
More importantly, news from Main Street Proxies:
Delta Air Lines (DAL)
Delta Air Lines posted financial results that saw a record passage revenue and strong unit guidance for the current quarter.
Costco posted monthly retail data that continues to reflect the right business model that makes a company Amazon-resistant, but it also helps to have more confident consumers.
March Comp Store Sales
Ex- Gas & Currency
It’s Friday the 13th and Earnings Season Begins
I love this table from CB Insights...that late bout of anxiety into the close came from yesterday’s big earnings calendar. It’s the most treacherous time for investors and even analysts who have seen faded cheer as reflected on conference calls. Accolades to management - such as "great quarter guys" and "congratulations on a great quarter" - peaked ten years ago.
Much is being made about America re-entering TPP, which wouldn’t be a magic elixir to make China an honest global player and non-abuser of rules and loopholes. It would help, but the deal needs to be amended mightily. In fact, it’s worse now than when President Trump kicked it to the curb.
Of course, a smart trade deal for CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) would be useful and ideally would include:
- IP protection
- Limits on currency manipulation
- Tariff limits
- Clear and powerful resolution provisions
- Commitments for future adjustments based on economic and technical changes
Solid bank earnings this morning.
Jp Morgam (JPM)
- Revenue $28.52 street $27.68
- Earnings $2.37 street $2.28
- Wealth management +18%
- Fixed income trading +8%
- Revenue $18.87 street $18.86
- Earnings $1.68 street $1.61
- Trading -7%
- Return on equity +9.7% from 7.4%
Wells Fargo (WFC)
- Revenue $21.9 street $21.7
- Earnings $1.12 street $1.06