Wednesday, April 25, 2007

Morning Market Comment - Dow 13,000 Here We Come

It's been all about earnings, or more specifically the outlook-spin and illusion (guidance), which we discussed at the end of March as 1st quarter earnings season was approaching. Many a company has managed to post less than jubilant numbers (IBM and Altera are two that immediately come to mind this week), but then throw in some positive statements about the quarters ahead or juice up a stock buyback and its off to the races. To TI's credit it did manage to post a stronger beat to the consensus and provided stronger guidance than many others but that real icing on the cake came as it took it upon itself to declare the worst for the chip world had passed - rocketing its stock. That TI news was the final piece of the battering ram needed by the bulls to break through recent tough short term resistance at just below the 500 area on the Semiconductor Index (SOX). With chips participating, it makes it easier to see the Dow not only breaking above 13k, but perhaps making more of a sustained run above that level for as long as recently range bound members of the market like semiconductors can do their own thing, which in the case of SOX would be to go on and challenge last year's high in the 550 area. Of course, that could be a problem and gets us back to the true reality of fundamentals vs the pie in the sky promises made in the guidance that the companies had to issue.

The other huge moving part of all of this is China and what it does about torrid economic growth. As noted last night, some are making huge bearish bets that developing markets will soon tank and a wary eye needs to be kept on the Chinese stock market.

The EEM put buying has me a bit worried, but I would really get concerned if the FXI is able to take out its old high.

This morning all is well for the bulls as stock are up more than 3 points following stronger than expected earnings and guidance from names like (AMZN), CV Therapeutics (CVTX) and Riverbed (RVBD).

There are some analysts are not complete Kool-Aid distributors. Here's one example: JP Morgan maintained an Underweight on Amazon says shares are "too rich". Imagine that, an analyst who has some sense of limitations.

One other notable call from JP Morgan this morning: They lifted the price target on U.S. Steel (X) from $100 to $115 on expectations for continued strong earnings growth. Ema's Market Blog has an interesting note on the steel sector.

Economic data came through better than expected: Durable-goods orders jump 3.4% on planes, capital equipment. The 10-year Treasury note down 6/32 at 99-26/32; yield 4.650%. The next batch come at 10 - the Existing Home Sales figures.

Pete Stolcer's has a full list of movers this morning.

See the latest on hedge funds at: There's a $1.1 bln hedge fund deal being reported today.

No comments: