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Jobless Claims Lift Futures

|Includes:DMND, JPMorgan Chase & Co. (JPM)
9:00am (EST)

Although it's not a done deal, the compromise backed by the President and Republican leaders on extending tax cuts led to choppy trading on Wednesday as bonds got crushed and the dollar gained strength.  The bulls are arguing that a tax-relief package will stimulate economic growth in 2011 while the bears are worried about the $1 trillion price tag.

The debate didn't bother the Financial sector which saw strong gains as the prospects of the tax cuts helped the group.  The sector finished the day with a gain of nearly 2%, on average, as Bank of America (BAC, $12.00, up $0.43), JPMorgan Chase (JPM, $40.26, up $1.01) and Morgan Stanley (MS, $26.47, up $0.81) stormed higher.

As a result, the Dow managed to finish with a gain of 13 points, or 0.1%, to settle at 11,372.  The index traded in a tight 60-point range for much of the session and hit a high of 11,389 where it met resistance once again.The S&P closed with a 4 point pop and ended at 1,228 while the Nasdaq cleared closed above the 2,600 level by adding 10 points for an official print of 2,609.

In earnings news, Diamond Foods (DMND, $45.82, down $0.72) was up 4% in after-hours trading last night after reporting a profit of $14.2 million, or $0.64 a share, versus $14.9 million, or $0.88 a share, in the year ago period.  Revenue jumped to $253 million from $180.6 million.  Wall Street was looking for earnings of $0.60 a share on revenue of $240 million.

The company also raised its current quarter and full-year profit outlook for 2011 by saying it sees quarterly figures at $0.85-$0.91 which was higher than the current calls for $0.86 a share.  For next year, Diamond Foods predicted $2.43-$2.49 a share, versus its previous forecast for $2.38-$2.48 a share.  The suit-and-ties were looking for $2.47 a share.The move in the Financials over the past few days has been impressive but we just don’t know if the sector is crying “wolf” again or if it is really ready to lead the next leg higher. We have been saying a sustained rally will need the sector participate if the market has a shot at extending its gains past its current two-year highs.

Back in September, we went long and strong on Bank of America as we thought shares might break past resistance as it appeared then the Financials were ready to join the rally. Well, the rally didn’t stop and Bank of America was facing resistance at $14. By mid-October, shares were at $12, we said to exit, as the charts showed a trip to $10 was in the cards.

Last week, shares hit a 52-week low of $10.91.

Well, we printed $10 and change but shares have bounced 10% off the lows in a week.

Let’s see how this plays out and we wouldn’t be surprised to see shares approach $14 again. However, we would wait for confirmation of a breakout above this level before we even think about jumping back in the sack with BofA.

Jobless claims came in better-than-expected at 421,000.

As we head to press, Dow futures are up 44 points; S&P futures are higher by 6; Nssdaq futures are showing an advance of 9 points.
Stocks: JPM, DMND