Oil was the word of the day
Oil was the word of the day as the markets turned a lackluster morning into a steady afternoon rally. The Dow was relatively flat most of the morning session with a dip down to 9675 before moving positive again and eventually climbing to its afternoon high of 9776. Dow components Chevron (CHV) and Exxon (XON) in addition to a strong 7% gain in Dupont (DD) all spurred the index higher.
The buzz word today was oil. Crude oil prices jumped $.84 to $14.69 a barrel. Not only is this the 4th straight gain in a row but the first close over $14 since November 4th. The oil index has risen over 12% in the last six days. The oil excitement has been fuelled by speculation that OPEC might cut output in their March 23rd meeting almost two weeks away. While many agree that the oil and drilling sectors are undervalued, at this point, the market has already priced in a cut of 1.5 mln/bbls a day. Anything less and oil enthusiasts are in for a big disappointment which OPEC has delivered before. Of course the airlines where down as a group today in response to the rise in oil prices.
Dupont was higher today on word that they will release a tracking stock to follow their life sciences division. Many analysts believe Dupont's life sciences has the biggest potential for the company's future success. This probably comes as a relief to Dupont investors as earlier this week the stock was quickly approaching two year lows.
The Nasdaq wasn't quite so bullish. Yes, it gapped open this morning but quickly fell to its low of the day at 2378. Three of the four horsemen of the tech world, MSFT, DELL, and CSCO were all lower today. INTC, the exception was up $1.56 as analysts from Gruntal and BancBoston Robertson Stephens both came to Intel's defense claiming that rumors of a pre-earnings warning were just that - rumors.
CSCO actually warned of an expected decline in gross margins in its 10-Q form today. Plus, the networking giant claimed that competition from other larger telecoms and well funded start up companies was increasing.
Given the troubles among the generals of the Nasdaq it was surprising to see it close positive. But after bouncing off resistance at 2400 three times today, it appears that the Internets carried the day and lead the Nasdaq higher near the close of trading. Out of the 32 Internet companies we track, only 6 were negative while the rest were lead by: AMZN +7.19, YHOO +6.31, LCOS +13.75, SEEK +6.81, MSPG +6.38, NSOL +5.81, RNWK +8.13, PSIX +7.13.
Lest you think we forgot, yes, both the Dow and the S&P 500 ended the day with record closing highs. But the U.S. markets were not the only ones up today. The Americas (like Argentina, Brazil, Canada, and Mexico) were all up across the board. Asian markets were mostly up with Hong Kong +2% and Japan up +2.5%. While Europe was mixed but London's FT-SE 100 and the German DAX both closed with less than a 1% change.
It is going to be hard to forecast market direction for tomorrow. Analysts eagerly await tomorrow's retail sales report. Investors are hoping for a strong number to validate that consumer spending remains healthy. Traders will be watching the earnings reports tomorrow.
Here is the list to watch for tomorrow:
Company Estimate Vs. Last Year Oracle $ .19 $ .15 National Semiconductor $-.20 $ .16 Ann Taylor stores $ .43 $ .09 Barnes and Noble $ .95 $ .98 CMGI $-.22 $-.15
Also under the microscope tomorrow will be Intel. The much rumored earnings warning should appear tomorrow or Friday if at all.
Investor sentiment seems to be leaning towards Dow 10,000 next week during triple-witching options expiration week. Since 1990 triple-witching weeks have been developing a pattern of behavior with the week of expiration generally being up while the week after tends to be down.
The bulls just might make it if the internals can stay positive. Today's market breath was positive with the combined NYSE and Nasdaq advancers beating decliners 3299 to 2857. On a side note, we are encouraged by the recent performance in the Russell 2000. The RUT has been up 4 out of the last 5 days and it finally closed back over 400 today with a gain of almost 2 points.
As always, confirm market direction before playing. We strongly suggest against holding any long positions over an earnings announcement. It is normally not worth the risks.
Good luck and Sell too Soon,