Stocks Rally On Healthy Earnings & Economic Data


Wednesday, April 14, 2010
Market Commentary:

The major averages jumped above important physcological resistance levels after a slew of stronger than expected earnings and economic data were released. Volume totals on the NYSE and on the Nasdaq exchange were reported higher compared to Tuesday’s totals which suggests increased institutional sponsorship. Advancers trumped decliners by over a 3-to-1 ratio on the NYSE and by nearly a 4-to-1 ratio on the Nasdaq exchange. New 52-week highs trumped new lows on both exchanges and new highs on the NYSE hit the highest level since January 2004! There were 86 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, nicely higher than the 46 issues that appeared on the prior session.  A healthy crop of new leaders making new highs bodes well for any market rally, so the recent expansion in leadership has been a welcome improvement.

A Slew of Healthy Earnings Lifts Stocks:

Intel Corp (INTC), JP Morgan Chase & Co (JPM) and railroad giant CSX Corp. (CSX) all topped estimates and reported solid Q1 results. All three stocks gapped up on Wednesday which helped the benchmark S&P 500 and the tech-heavy Nasdaq composite close above their psychologically important resistance levels for the first time since September 2008 (when Lehman failed). At this point, all the major averages have closed above their latest important psychological resistance levels: Dow Jones Industrial Average topped 11,000, the S&P 500 surpassed 1,200, and the Nasdaq composite closed above 2,500 which bodes well for this 7-week rally.  

Healthy Economic Data Also Lifts Stocks:

The consumer price index was very mild and below expectations which suggests inflation remains tame as the economy continues to recover. Retail sales jumped in March which helped a slew of retailers hit fresh 52-week highs. Elsewhere, the Fed released its Beige Book which showed the economy continues to improve across much of the nation. Economic data from Asia was also positive: Korea reported a large drop in unemployment, Singapore reported strong GDP growth in Q1 and many believe China will report a large increase in GDP when they report their numbers on Thursday. The one negative data point was that US mortgage applications tanked which reiterates how fragile the ailing housing recovery is. However, it was very encouraging to see a slew of housing stocks surge in recent weeks and months which reiterates our bullish stance on housing.

Market Action- Confirmed Rally:

The benchmark S&P 500 Index currently has 5 distribution days while the Nasdaq Composite and Dow Jones Industrial Average have 4 since the March 1, 2010 follow-though-day (FTD). These distribution days have not been damaging which is a welcomed sign. Trade accordingly.

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