Comtex SmarTrend(R) Morning Call -- March 5, 2010
Sudden investor optimism caused stock prices to move up late in trading Thursday. The DJIA reached above 10,450 before slipping back slightly to close up 48 points at 10,444. The SmarTrend(R) indicators had eased down enough during early trading yesterday to be ready to rally on good news. It came and stocks climb and today's unemployment report can provide the propellant to drive the DJIA upward to 10,700 next week, starting now.
Early market trading was flat and choppy, threatening at one point intraday to signal a sharp market decline, as mixed economic reports concerned investors that the payrolls data today could be bearish; but stocks rallied in the last 15 minutes before the close, a sign that traders were bullish ahead of the unemployment report. The daily SmarTrend(R) uptrends to downtrends were biased to the upside at 51:6; no longer polarized to the upside, but strong enough to cause the IBDI to climb again and the Trend Ratio to edge up also. The intermediate-term uptrend plus the continuing long-term uptrend together caused the investing environment to be bullish.
As was stated here yesterday, the trading environment was positioning itself for a sharp rise by the DJIA, which has not occurred yet despite the climb by the near-term trend indictors into overbought zones in the last week. However, as these indicators have eased back to form high plateaus from which to rally, the DJIA has moved sideways to up, a bullish sign. Thus four of four near-term trend indicators appear to have finished retreating to their bases from which to launch a burst up by the market indices. The DJIA is expected to rally over the next few days until it reaches new resistance and the rally rests again for a few days.
From the trade-term trend perspective, this phenomenon appears to have started just before close Thursday. A report of a rise in February retail sales, which were anticipated to have been limited by the severe U.S. weather, raised retailers' shares. Also, some lift was the result of an improved outlook for no downside surprise to this morning's unemployment report, which outlook was derived in part from reports that showed the number of U.S. workers filing new claims for state unemployment benefits fell. These issues and related economic information are discussed below. Clearly the elephant in the market's living room now is the employment situation as improvements there are seen as critical to continue the February signs of increases in consumer spending, which drive 70% of the U.S. economy. The SmarTrend(R) indicators have been reflecting, and continue to reflect, a bullish outlook for stocks as investors wait for word from related economic reports. For a look at the list of stocks that changed trends in the last week and/or hear podcast of this report, please go to http://www.mysmartrend.com.
Investors held their breath this week, awaiting the government's monthly jobs numbers, even as they anticipate the numbers manipulated by three major snowstorms and census-worker hirings. Meanwhile, economic posts have proved mainly positive, with the exception of ongoing frailty in housing markets, as even the numerous jobs releases painted a picture of labor stabilization. The Greek tragedy appears well short of its final act, with the German, or IMF deus ex machina waiting in the wings; and President Obama's relentless bid to force through a health care reform package looks temporarily stalled.
Yesterday's modest gains on light volume sent the DJIA into positive territory on the year, up 47 points, or 0.5% to 10,444 on a number of component upgrades, including Disney (NYSE: DIS), up 2.9% on a Bank of America (NYSE: BAC) "buy" recommendation, Coca-Cola (NYSE: KO), up 1.0% on a UBS (NYSE: UBS) ratings increase to "buy," and a Boeing (NYSE: BA) increase to "neutral." The NASDAQ increased 0.5% to 2,292 on gains in Google (NASDAQ: GOOG), up 1.7%, Oracle (NASDAQ: ORCL), up 1.1%, and Microsoft (NASDAQ: MSFT), up 0.6%. The S&P500 tacked on its fifth daily rise in a row, up 0.4% to 1,123 as Goldman Sachs (NYSE: GS) rallied 3.7% amid a 0.8% financial sector gain, also sharing in the increases from Google and Disney.
Within the S&P500 ten sector groupings, only two ended the session lower: oil and gas, off 0.4%, on US dollar gains and a build in crude inventory levels, and health care, down 0.2%, on government initiative concerns. Meanwhile, financials and consumer service sectors gained 0.8%; followed by consumer goods and tech (+0.5%); industrials (+0.3%); telecom (+0.2%); basic materials (+0.1%); and utilities (+0.04%).
The pivotal nature of hiring numbers is based upon its weight on consumer sentiment and so spending, the area of the economy which must sustain US economic growth beyond its current dependence on government support. Yesterday showed consumers willing to spend even shuttered by three major snowstorms. Showing their best monthly gains since November of 2007, retail sales climbed 4%, their sixth straight increase; consensus estimates had been 2.9% gains from a 4.7% decline prior. Abercrombie and Fitch (NYSE: ANF) surprised with a 5% comparable sales jump; its shares shot up 14.6%. Walmart (NYSE: WMT), no longer reporting monthly sales numbers, pleased investors with an 11% dividend hike.
Housing markets, however, did react to the harsh winter weather in the Northeast, as January pending home sales disappointed with a 7.6% fall; analysts had anticipated a 1% gain after December's revised 0.8% increase. Lennar (NYSE: LEN) shares fell 1.4%; Toll Brothers (NYSE: TOL) dropped 0.9%; and Pulte Homes (NYSE: PHM) shed 0.6%.
Factory orders continued recent increases, up 1.7% in January, just shy of consensus estimates of a 1.8% rise, and up from a revised 1.5% increase prior.
The day's jobs releases posted proof-positive of stabilizing labor market trends. Weekly jobless filings, which were not obscured by weather events, showed an inline drop of 29K filings. The ADP private sector release showed 20K jobs lost in February, the slowest number of jobs lost in two years. And the Challenger, Gray report of planned layoffs fell to 42,090, its lowest in four years. These precursor reports will soon be eclipsed by the non-farm payrolls number, already discounted by non-recurring, depressing events. Nevertheless, the markets have indicated the report's importance all week, as volume has remained suppressed throughout, staying under 1 billion shares on the NYSE again on Thursday.
Besides the day's 800 pound gorilla on the coffee table, there will be few corporate releases of much interest, nor speeches from Fed members of note. January consumer credit is expected to report at -$3.8 billion, versus -$1.7 billion prior.
According to our analytics team, the DJIA has moved sideways to up over the past week, a bullish sign. Therefore, four of four near-term trend indicators appear to have finished retreating to their bases from which to help launch an upward burst in the market indices. The DJIA is expected to rally over the next few days until it reaches new resistance and the rally rests again for a few days. To examine the list of stocks changing trends in the last week, please click on http://www.mysmartrend.com.
In the corporate corner, Marvell Tech (NASDAQ: MRVL) reported a swing to profitability during its fiscal fourth quarter on strength in its new communication chips. Adjusted earnings hit 40 cents, up from last year's five cents, on revenues that jumped 64% to $842.5 million. Results topped the firm's earlier forecast of 33-39 cent results on $820-$850 million in revenues. Goldman Sachs (NYSE: GS) this morning maintained its "buy" rating, and lifted the price target to $24 from $22.
Sprint (NYSE: S) received a corporate rating downgrade and senior unsecured debt rating decrease from Standard & Poor's to BB- from BB. Analysts there cautioned, "The rating action reflects our view that post-paid subscriber losses will continue to pressure revenue and cash flow despite growth in the pre-paid business."
Lazard upgraded Allergan (NYSE: AGN) to "buy" from "hold," with a price target of $74.
JP Morgan (NYSE: JPM) upgraded TiVo (NASDAQ: TIVO) to "overweight" from "neutral," lifting the price target from $15 to $23.
Deutsche Bank (NYSE: DB) initiated coverage of a number of fertilizer stocks, starting Agrium (NYSE: AGU) at a "buy" and an $85 price target, Potash (NYSE: POT) at a "hold" and a $120 price target, and Mosaic (NYSE: MOS) at a "hold" and a $65 price target.
Goldman Sachs (NYSE: GS) downgraded Capital One (NYSE: COF) to "neutral" from "buy" and lowered the price target from $50 to $45.
The US government taught the Street a lesson of buying low and selling at least higher, reporting over a $1.5 billion profit from selling warrants received as part of its Bank of America (NYSE: BAC) bailout, using a foreign bank, Deutsche Bank (NYSE: DB) as its sole underwriter to do so.
By Chip Brian, Editor-in-Chief, Comtex news Network
www.Comtex.com -- editor@mysmartrend.com
The following equities mentioned above include:
Comtex SmarTrend Alert
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Ticker Last Close Trend Direction Trend Price Trend Date
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AGN 60.10 Uptrend 59.62 2/16/2010
AGU 67.18 Uptrend 62.19 2/10/2010
ANF 41.52 Uptrend 33.70 2/4/2010
LEN 16.55 Uptrend 13.38 12/23/2009
MRVL 20.13 Uptrend 19.87 2/16/2010
INX -- S&P 500: 1,123 Lo: 1,117 Hi: 1,124 Change: +4.18
http://www.mysmartrend.com/images/INX20100305.jpg
INDU -- DOW JONES: 10,444 Lo: 10,391 Hi: 10,452 Change: +47.38
http://www.mysmartrend.com/images/INDU20100305.jpg
QQQQ -- NASDAQ: 2,292 Lo: 2,274 Hi: 2,293 Change: +11.63
http://www.mysmartrend.com/images/QQQQ20100305.jpg
This report is divided into three sections. The first deals with our 5 proprietary market indicators, the second section examines important economic and business happenings which are expected to affect U.S. Stock market movements and the third section describes specific company announcement and earnings releases. Experience demonstrates that when these 5 indicators reach extremes they can shortly be expected to change direction and move in the opposite direction. When such happens in all or most of the 5 indicators, on or about the same time, followed by a move from below an extreme (oversold) to above that extreme (or vice versa for overbought), a change in market direction is very probable. The near term market moves are measured to identify the best possible returns for traders/investors. Daily price/volume examinations provide the best data upon which to base such forecasts. In this report though, intraday indicators are examined to improve the point of entry timing for the expected move.
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