Friday, May 1, 2009

A Nice Day Considering The News Isn't Really All That Good

Well, it was another back-and-forth day for the market today as buyers stepped up to the plate after some initial weakness, but again, a mid-day push past resistance levels was used as an opportunity to do a little selling. In the end, though, a last ditch effort into the close helped the indices to close the day in the green, with the S&P 500 closing a couple of point above that 875 level everyone’s been watching for the first time since Jan. 9.

In the end, financials and consumer discretionary were the only two cyclical sectors to finish in the red. Tech showed a good deal of relative strength, but it was energy that was the big winner on the day, with each component of the XLE closing with gains.

Indeed, the strength in that area allowed market players to shift away from areas that had become extended, such as casinos and homebuilders, and into other groups, including several China-related names.

Let's see if this move off of March lows can continue. It may be time for this market to take a rest, but as we’ve seen, momentum can be a powerful thing.

Going into more detail, despite a lower start, the stock market was able to finish a choppy trading session with modest gains, thanks largely to a rebound in energy stocks. Still, trading volume was low, suggesting that many investors were sitting on the sidelines... Less than 1.3 billion shares traded hands on the NYSE this session, but the lack of participation didn't stop stocks from concluding the week on a positive note. In turn, stocks logged a weekly gain of 1.3%... Energy stocks snapped back from a 2.1% loss in the prior session to log a 3.0% gain Friday. The energy sector's rebound was helped along by higher energy prices; natural gas prices spiked 5.1% to close at $3.55 per contract, while crude oil futures finished pit trading with oil priced 3.4% higher at $52.84 per barrel... Still, lower oil prices than those seen last year are weighing on profits at many oil companies. Such has been the case for CVX, which reported this morning that its first quarter earnings per share were more than halved since last year. Shares of CVX were able to finish higher, though... Strength among energy stocks provided support to the broader market while the other major sectors traded in mixed fashion... Financial stocks attempted to make an early move from negative territory into the green, but sputtered and finished the session with a 1.7% loss, worse than any other sector. The sector's decline came amid weakness in life and health insurers following some ugly quarterly results from MET... MA also fell under pressure for posting some disappointing quarterly metrics, even though the company was still able to top analysts' consensus earnings estimate for the latest quarter... Banks came under pressure as investors became a bit skittish after hearing that results from the government's bank stress tests won't be released until May 7, which is later than the May 4 release that was originally planned. The delay comes after executives at several banks began to debate the test results, which suggests the government's findings weren't entirely positive. According to The Wall Street Journal, regulators are expected to disclose potential loss estimates for individual banks and tally certain results across all tested banks... Early cycle stocks were able to log respectable gains as the industrial sector climbed 1.1% and the materials sector advanced 0.3%. Their gains have compounded in recent sessions as many investors attempt to chase stocks they expect to benefit first from an economic revival... However, economic conditions remain dour. Factory orders for March declined 0.9%, which is worse than the 0.6% decline that was widely expected, and February orders were revised lower to reflect an increase of 0.7%... Meanwhile, the ISM Manufacturing Index for April showed continued contraction. It came in at 40.1. However, that was better than the 38.4 that was expected, and was also up from 36.3 in March... With economic conditions continuing to challenge businesses and consumers, F announced April auto sales fell 31.6%, while GM said its US sales fell 34% in April... As part of an effort to loosen credit flow and stimulate economic conditions, the Federal Reserve announced that, starting in June, commercial mortgage backed securities and securities backed by insurance premium finance loans will be eligible collateral under the TALF plan.

Keeping in mind the expected pause I mentioned earlier, there are some stocks I'm looking to buy at current prices: MS, which I think can trade to 40 if its stress test is ok; BAL, a cotton ETF; JJS; SPWRA and WFR - 2 must-own names right now; and MXIM, which crushed.

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