Intraday Market Update
US equities have recovered from early losses and are back in the green after mixed earnings reports with a cautious tone, and ahead of Friday's OPEX. All of the major indexes are consolidating at their daily highs in early afternoon trading, which are near yesterday afternoon's highs before the indexes sold off late in the day. A break and follow through above SPX 1,100 could fuel some buying and short covering. There is no economic news to report and trading is relatively quiet as the end of summer takes shape with light volume. Target Corp posted in-line earnings and BJ's Wholesale missed estimates and lowered its guidance. Deere & Co. offered cautious comments about European markets, while Analog Devices topped estimates. Gold and crude oil have recovered +1% and +2% from their daily lows. Overseas, the Asia-Pacific region was mixed while Europe was mostly lower.
Big box retailers Target (TGT) and BJ's Wholesale (BJ) reported mixed Q2 results. TGT missed revenue estimates and its gross margins were flat, while BJ missed top and bottom line estimates and trimmed its 2010 guidance. On the conference call, TGT said growth in guest traffic and apparel sales "remained robust" and it continued to exercise control of its expenses, adding "Regardless of the pace of recovery, we are well positioned to continue to gain profitable market share." BJ's CEO warned that consumer spending would be weak in the second half of 2010 with the environment remaining extremely competitive. TGT is up +3% while BJ is down -3%.
Deere (DE) has given up approximately -2% after their Q3 earning report and cautious guidance. DE's earnings beat estimates but that is par for the course. On the conference call, Deere's CEO warned that European markets are down sharply, citing that demand for construction and forestry equipment is improved from last year but still remains far below normal levels. The firm did offer upbeat comments about South America, citing that industry sales are projected to increase by +25 to +30%. In the end, the firm offered 2010 guidance that was essentially in the middle of its prior range, which was not enough for investors and is weighing on the stock.
Friday is OPEX and there seems to be a gravitational pull to SPX 1,100 and SPY 110. Trading is sure to be choppy in the coming days as big money pushes the market around to square positions.
Core Sector List:
Overall reading: 15 sectors advancing, 5 sectors declining
Strongest Sectors: Home Construction, Retail, Semiconductors
Weakest Sectors: Utilities, Internet, Natural Gas
S&P 500 - Daily and Hourly Charts:
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