Markets Close Up, Not Sure Why

[Excerpted from Bill Cara's Daily Report]

There was plenty of economic data released in the US during the day;however the equity market sidetracked until 2pm ET, when with prices atmodest losing levels on the week until that point, suddenly, and for nodiscernable reason, there was a rally that left the indexes with smallgains through Thursday.

Perhaps traders were anticipating a positive quarterly report from Google (GOOG +2.4% on +151% of average daily trading volume)? After the close, the company did not disappoint, beating both revenue and EPS estimates.

The company posted net income of $1.42 billion ($5.16/share), up +8% from the $1.31 billion ($4.84/share) recorded during the same period a year ago. Revenue for 1Q2009 increased +10% to $4.07 billion, from $3.7 billion, excluding traffic acquisition costs. On average, analysts had expected earnings per share of $4.93 and revenue of $4.08 billion, according to Yahoo Finance. For the first time in the Google’s history though, net revenue declined quarter to quarter. The company posted revenue of $4.22 billion during the 4Q2008. But EPS were up from $5.10.

The economic data added up to a lot of pain on many fronts, but the media spin was that perhaps there is a little less pain. In any case, the data was expected, and there was no remarkable affect on share prices.

By the close Thursday, the DJIA (+95.81 +1.19% to 8125.43, S&P 500 (+13.24 +1.55% to 865.30), and NASDAQ Composite (+43.64 +2.68% to 1670.44) were all higher, all of it in the final two hours.

The Toronto Composite (+97.26 +1.05% to 9343.37) and the Toronto Venture Board (-5.81 -0.59% to 982.13) were headed in opposite directions, mostly because the junior market is over-weighted with precious metals exploration companies, which suffered as $GOLD pulled back sharply (-$15.60/oz to 875.60) to technical support levels.

Ahead of the Citigroup (C) and General Electric (GE), trading in the major international equity markets Friday has been slightly positive, but uninspiring. Japan’s Nikkei 225 index (+1.74% to 8907.6) was the best gain on the board. Australia’s All Ordinaries index (+0.07% to 3728.1), Hong Kong (-0.12% to 15601.3), Shanghai (-1.19% to 2503.9) and India (+0.96% to 11052.9) were mixed. India’s previous day had been down -3.0%.

In Europe at 6:17am ET, France (+1.22%), Germany (+0.59%) and UK (+0.32%) was cautiously optimistic.

In NY Thursday, there was strength in the Tech sector (XLK +3.0%) as the disk drives ($DDX +5.5%), hardware ($HWI +4.7%) and semi-conductors ($SOX +3.4%) led the way. Cara 100 company stocks like SanDisk (SNDK +6.5%), Dell (DELL +6.7%) and Research in Motion (RIMM +5.6%) were strong. Nokia (NOK 11.4%) bounced sharply after a negative quarterly report. The leading sectors, however, were Consumer Discretionary (XLY +3.5%) and Industrials (XLI +3.4%).

For the Cara 100 companies, the losers were led by precious metals company stocks: Buenaventura (BVN -7.2%), Goldcorp (GG -7.1%), Silver Wheaton (SLW -6.0%), and Kinross (KGC -5.2%). Aetna (AET -4.2%) was a loser as well as T-Bill yields continued to plunge (to just 0.107), reflecting credit market problems, which affects insurers.

US Treasury yields lifted on the 30-, 10-, and 5-year instruments for the first time this week as the long bond ($USB -0.73% to 126.98) pulled back. But at the close on Monday, the $USB was priced at 127.09, so there has been little movement.

The $USD gained strength for the third consecutive day (+0.24% to 85.18), but is still down on the week as the previous week’s close was 85.67.

Meanwhile yesterday, the Euro (-0.30% to 131.86), the Pound (-0.45% to 149.31), and Cdn Loonie (-0.51% to 82.71) softened against the $USD, but the Pound and Loonie are strong week over week. The Yen (+0.06% to 100.66) was almost unchanged on the day and up about +1.0% on the week.

Crude Oil ($WTIC +0.39/bbl to 52.16) recovered a bit after three straight days of losses, after the inventory glut had become a concern. June Oil this am is quiet at 51.80.

Spot (cash) market prices this morning at 7:30am ET (compared to Thursday am) for gold, palladium, platinum and silver were much lower: 868.52 (888.45), 231 (233), 1205 (1213), and 12.00 (12.62), respectively.

DJIA futures at 6:50am were about flat at 8065, then rallied to 8090 after the GE and C reports were issued. US Dollar June futures are up +0.71% to 86.105, and the Euro down -0.81% to 1.3057.

AP has reported that General Electric earned $0.26/share in Q1 compared with $0.43 last year. Wall St Journal reported:

General Electric's first-quarter net income fell 35% to $2.8 billion, slightly beating analysts' estimates, as revenue declined 9% to $38.4 billion. The company's capital finance division earned $1.1 billion in the period, down 58% from a year earlier, while NBC Universal also had a tougher performance due to a soft advertising market.

However, Citigroup was reported to have posted better-than-expected Q1 results. Wall St. Journal reported:

Citigroup posted its first profit in 18 months, as the company continued to build loan-loss reserves and said it cut 13,000 jobs so far this year. First-quarter net income was $1.59 billion, compared with a prior-year net loss of $5.11 billion. Revenue nearly doubled to $24.79 billion. The latest quarter had a per-share loss of 18 cents on a 24-cent charge from revising the conversion price on preferred stock. The company said its proposed preferred-stock conversion wouldn't be launched until the government finishes its industry stress tests. The stock has nearly quadrupled in the past month, reflecting a short squeeze tied to the planned conversion and the potential that Citigroup returned to the black for the quarter.

Comments

[evanz:]

Why? It's all about curvature (i.e. second derivative) of the data. If you wait for the slope (first derivative) to improve, you'll have missed the train.

Apr 17 08:18 AM

[connorport:]

Are you kidding me. When everyone goes silent and analysts low ball all estimates its bound to temporarily go up. Not understanding why banks are going up though now that they have announced massive Dilution to their stock value and RS most definitely around the corner. How many shares can GM carry? i don't think they will dilute to 15 billion shares without a RS. GE needs to lick its greedy wounds and stick with what has worked for decades and that's innovating new technologies, creating jobs for americans. American Jobs = money for americans to buy appliances etc.(Henry Ford has already proved this to be a fact). Stay away from the quick buck greed and luster of wall st financial's. Has anyone ever heard if its not broke don't fix it? Immelt needs to stick with what GE does or resign.

Apr 17 01:05 PM

[Moon Kil Woong:]

How can people call it a surprise when everyone expected after FASB accounting rule changes and PPIP Enronesque pricing systems are expected to go into place that banks would simply stop marking down their losses. In fact, even if they reported huge losses people would say the worst was over, simply because they know losses can once again be hidden.

In reality, banks coninue to make ridiculous spreads and hoard cash because the reality of their situation remains essentially the same. Once again we sacrifice the long term for the short term and a pack of lies and are asked to cheer.

Apr 17 06:47 PM

[Ergo:]

With all the money looking for an opportunity, I'm reminded of this piece from the Onion (humor): Recession-Plagued Nation Demands New Bubble To Invest In

www.theonion.com/conte...

Apr 17 10:08 PM

[donzelion:]

Citibank went from losses of $5 billion to earnings of $2 billion, a positive surge of $7 billion or so over the previous period. How could it happen?

Possibility 1: Citibank's job cuts amounted to massive savings.
Possibility 2: the recession and downturn are a lie manufactured by evil media that want to lead everyone astray.
Possibility 3: great leadership has saved the day.
Possibility 4: modified accounting rules have removed losses from the equation, leaving only games.

Somehow, I find all but the fourth possibility to be laughable. However, maybe somebody can come up with a better alternative...

Apr 18 07:57 AM

[nukldrager:]

whatsa second and first derivative?


On Apr 17 08:18 AM evanz wrote:

> Why? It's all about curvature (i.e. second derivative) of the data.
> If you wait for the slope (first derivative) to improve, you'll have
> missed the train.

Apr 18 09:24 AM

[capt Brian:]

Did anyone tell the truth here, or do we have to guess again?

Apr 18 02:14 PM

[Mayascribe:]

Hmmm... For the first couple of months "lending was tight." Did the big banks use TARP money to trade up the market, making billions and skewing their balance sheets?

If I was a big bank CEO who received $10 billion I would order my veteran traders to get to work on the depressed stock markets. Since the begining of the year, the markets are up about 30%. Simple math says that $10 billion then becomes $13 billion, and suddenly the first quarter earnings come in unexpectedly high.

Hmmm...

Apr 18 07:01 PM