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Holding gains

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The major indexes are off their best levels of the session, but holding gains with the Dow Industrials (INDU) up 22 points at 8,670 after testing the 8,700 level for the fourth time in as many sessions, while the broader S&P 500 Index (SPX.X) 941.30 +0.21% holds onto a 2-point gain after inching its way to 948.23 earlier this morning and a new multi-month high.

The GSTI Software Index (GSO.X) 119.93 +2.25% is this morning's early sector winner with NASDAQ-100 (NDX.X) 1,153.86 +0.49% component Intuit (NASDAQ:INTU) $42.58 +9.23% leading both the sector and index higher after reporting Q4 earning per share of $1.05 last night, which beat estimates by 3 cents per share. The company said revenues rose 29.2% year-over-year to $634.7 million, which was in line with consensus of $634.4 million. Looking forward, the company said it sees a Q4 pro forma loss of $0.06-$0.09 on sales between $240-$250 million, which surrounds analyst's estimates of an EPS loss of $0.09 on revenues of $245.3 million. Bullishness has come from comments out of Merrill Lynch that while the firm is lowering its own FY2004 EPS from $1.70 to $1.68, investors should remain bullish as the shares appear undervalued and have been trading at less than 22-times calendar year 2004 EPS estimate of $1.79. Some traders are also attributing today's gains in INTU as some bears having been caught short on prior rumors circulating that INTU would miss their Q3 earnings. According to NASDAQ, April 15th reported short interest at just over 7 million shares, down from March's 8.9 million share level, which was a 12-month high short interest. With average daily volume of just over 6 million shares, current days to cover is just 1.15. While there may have been some short-term bears looking for a disappointment in the stock, I personally don't view the stock as a "short-squeeze" type of candidate.

Economic data released during the market had April industrial production falling 0.5%, which was slightly worse than the 0.4% decline forecasted by economists. Earlier this morning, March business inventories showed a worse than expected 0.4% rise and most likely has this morning's industrial production showing a decline as adjustments are made by manufacturers on "lack of pull through" or demand.

Capacity utilization was also reported at the same time as April industrial production and showed just 74.4% of the nations production capacity in use (lowest level since 1983). Economists had forecasted April capacity utilization at 74.5%, so no big surprises here, but also depicts plenty of capacity and production lines unused at the industrial level, still awaiting some type of demand dynamic to unfold before any type of ramp up in production would be found.

Market internals at the 11:00 AM EST mark have the NYSE reporting advancers outnumber decliners by a 15 to 13 margin, with 149 stocks trading new 52-week highs compared to just 3 stocks at new 52-week lows. NASDAQ has advancers outnumbering decliners by a 15 to 12 margin, with 135 stocks trading new 52-week highs and 9 stocks trading new lows.

Jeff Bailey

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