It's All About Earnings

[Excerpted from Bill Cara's Daily Report]

After 1:00pm ET Tuesday, US equity markets pulled themselves out of a funk, ending the session with a seventh straight gain. At the closing bell, the S&P 500 (954.58 +3.45 +0.36% for a 2009 high, with an intra-day high of 956.53), the DJIA (8,915.94 +67.79 +0.77%) and the NASDAQ Composite (1,916.20 +6.91 +0.36%) all had gains thanks to the afternoon bump.

The defensive Healthcare sector (XLV +1.5%) was the winner, while Financials (XLF -0.9%) continues to be a concern.

Among the leading industries, the winner was Biotech ($BTK +2.8%) again, while the big loser was the Banks ($BKX -3.1%) again.

Among the Cara 100 companies, the leading company stocks were Millicom International Cellular (MICC +10.5%), First Solar (FSLR +6.0%), and Dell (DELL +3.2%). The biggest losers were Aetna, Brunswick and Silver Wheaton (AET -3.8%, BC -2.9%, and SLW -2.5%). Note that AET list -3.6% Monday as well, “possibly on the negative reaction in Congress to President Obama’s proposal for health care reform”, which is turning out to be a boondoggle where people recognize the need, but taxpayers, watching the cut-backs in States like California, are wondering who is going to pay for it.

Millicom Q2 earnings were down from $1.22 to $1.05 2Q2008 and down -12.5% over the consensus estimate of $1.20. The stock surged on more than double the average daily trading volume. The good news, apparently, is that total mobile subscribers increased +25% Y/Y to 30.8 million, and that operating free cash flow will be in the mid teens this year despite bad economic conditions. The Daily-Weekly RSI-7 is now a very risky 91.5 and 83.5, respectively.

In the Canadian equity markets Tuesday, the Toronto Composite (10,515.32 -25.39 -0.24%) and Toronto Venture bourse (1,114.64 -3.45 -0.31%) were both a tad weaker than US equity markets.

The $USD (78.90 +0.03 +0.04%) was largely unchanged on the day, and the Yen (106.64 +0.53 +0.50%) and Loonie (90.60 +0.23 +0.25%) were winners against the Euro (142.15 -0.19 -0.13%) and Pound (164.59 -0.94 -0.57%).

The higher Loonie was a sign that the Crude Oil price was firm ($WTIC 65.61 +0.32 +0.49%), while the weak Euro and strong Yen put downward pressure on $GOLD, which closed flat at 948.90.

On Monday, the US long bond ($USB 118.33 +1.14 +0.97%) was strong for a second consecutive day, as Fed head Ben Bernanke spoke to the first of two Congressional committees. His message seems to be that he has taken steps to control the inflation that would normally follow economically stimulative monetary policy, but there are many economists who are more concerned about the prospects of deflation. Bernanke did opine a concern for commercial real estate prices going forward, which would put pressure on the bank holdings. With the higher bond prices, Treasury yields for 30-year (4.373 -0.93 -2.08%), 10-year (3.477 -1.08 -3.01%), and 5-year (2.332 -1.01 -4.15%) were soft again.
http://stockcharts.com/charts/gallery.html?$USB

The Treasury bill yield got a boost as capital seemed to flow from bills to longer duration notes and bonds (0.180 +0.20 +12.50%).

Earlier Wednesday, Austral-Asian markets were mixed with Japan’s Nikkei 225 (9,723.2 +0.74%), China (3,296.6 +2.60%), and Australia (4,068.9 +0.51%) on the rise and Hong Kong (19,248.2 -1.30%) and India (14,843.1 -1.46%) losing ground.

The European equity bourses have been quiet today, awaiting important earnings releases. The French CAC (3,293.1 7:46AM ET -0.30%), German DAX (5,095.8 7:32AM ET +0.04%) and UK FTSE 100 (4,483.7 7:32AM ET +0.06%) were close to flat.

Spot gold, palladium, platinum and silver were a tad negative on the day so far: (947.02 -2.28 -0.24% 07:48am ET); (251 +1 +0.40% 07:48am ET); (1167 -7 -0.60% 07:48am ET); and (13.45 -0.15 -1.10% 07:48am ET), respectively. As noted yesterday, as Bernanke speaks to Congress, the FOMC usually tries to aid his position by selling precious metals. Wednesday he speaks to the Senate.

Earlier Wednesday, the Euro was a tad stronger (1.4216 +0.0021 +0.15% 07:35), while Crude Oil futures (65.00 -0.61 -0.94% 07:35am ET) and the DJIA futures (8858 -28 -0.32% 07:35am ET) were up a tad weaker, and getting sold off as we move closer to the opening bell.

But Wednesday will be about earnings.