Today’s pre-holiday session is very mixed with the DOW trading lower. The index is being hurt by large declines in the energy components CVX and XOM based on the largest loss in energy prices in a year. Crude oil has slipped to $67 a barrel. On the other hand, the shares of AAPL and UNH are doing well. The DOW is currently lower by 72 as this is being written. The S&P 500 is down by 8 while the NASDAQ is higher by 10 due to strength in NFLX at another new high. There are also gains in AMZN, BKNG and NVDA. The Russell 2000 Index of small stocks is flat.
Breadth numbers are slightly negative while the VIX is up to 13. This volatility index is having strong support around the mid-12 level and showing corresponding resistance in the S&P as it gets close to 2740.
Bond yields continue to decline with the 10-year Treasury Note down to 2.93% and the 2-year at 2.48%. The Euro is lower to 1.166 while the Japanese yen is also a little weaker at 109.4. Gold is down a bit to $1,303 an ounce. The big story of crude on the decline has to be considered good for consumers, sort of like a tax cut which can be used to increase spending or pay down debt.
Earnings gains for 2017 in the S&P were up by 12%. For 2018 the number has been moved up to 18%. For the first-quarter, the gains were 26%…hard to believe because many stocks sell off after they beat these better than expected numbers. If the profit reaches this level, it would be the best quarter for earnings in seven years. In addition, revenue growth is supposed to show advances of around 8%. Of the 485 S&P companies that have reported, earnings gains have been better than expected in 79% of them. This compares to a 75% beat rate over the past four quarters and a 64% longer-term average beat. Guidance has been weak in many cases and stocks that rose into their reports are getting the old “buy the rumor, sell the news” treatment in many cases.
Donald M. Selkin
These are excerpts from Don Selkin’s Daily Market Notes, abbreviated and updated with permission from the author. Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analyses concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, Recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: Bloomberg Financial, Reuters, and the Associated Press.