Taking the theme of St. Patrick's Day to heart, stocks wore green on Wednesday continuing their march higher. The Dow Jones Industrial Average led the gains, soaring nearly 48 points to close at 10,733.67 while the S&P 500 has apparently kissed resistance at 1150 good bye with an almost seven-point gain today to close at 1166.21. The Nasdaq participated in the festivities as well, flirting with 2400 before settling 2389.09, gaining just over 11 points on the day. For those that like fun facts, the Dow closed at a 17-month high today.
A broad swath of Dow constituents helped the index move higher today as 23 of the 30 Dow stocks rose on the day. International Business Machines (IBM) was the biggest loser, shedding 0.91% to close at $127.76. Oddly enough, not one Dow stock gained 1% or more. Exxon Mobil (XOM), the largest U.S. oil company was the top gainer at 0.79%, followed by Caterpillar (CAT), the largest maker of construction and mining equipment, which notched a gain of 0.77%. JPMorgan Chase (JPM), the second-largest U.S. bank, led the gains for Dow financials, adding 0.55%.
In at least a couple of ways, Wednesday's trade was reminiscent of many of the up days we saw in 2009 in that commodities and financials were in favor while the U.S. dollar declined. The greenback fell against 12 of the 16 major currencies today. News that the Federal Reserve intends to keep interest rates ''exceptionally'' low for an extended period is music to the ears of equity bulls and bad news for the Dollar. The Dollar Index had a nice rally while stocks languished in late January and early February, but it appears that rally has subsided as riskier fare has become popular again and the Dollar Index now resides at its lowest level in a month.
Dollar Index Chart
Dollar weakness helped the S&P 500 rise for a third consecutive day. The index has now rallied over 70% since the March 2009 lows while the Dow extended its winning streak to seven straight days. As I mentioned earlier, commodities played a heavy hand in extending stocks' gains today. Goldman Sachs boosted its outlook for commodities today, saying it expects commodities to return 17.6% over the next year. Not surprisingly, Goldman was bullish on crude oil and copper, along with corn and platinum.
Despite the fact that the Energy Information Administration said crude inventories rose by 1 million barrels last week, NYMEX-traded crude for April delivery flirted with $83 a barrel, gaining $1.23 to close at $82.93 a barrel. OPEC announced it would not scale back production quotas, but it is hard to argue with the that fact oil prices seem poised to keep moving higher.
Speaking of commodities, it was a strong day for coal stocks as the Market Vectors Coal ETF (KOL) gained 2.1%. The gains were led by KOL's tenth-largest holding, Massey Energy (MEE). Massey's big day is a testament to the strength of the coal sector and offers further proof that certain commentators that enjoy ripping coal stocks are costing the people that heed this foolish advice a pretty penny.
Look at Massey this way. The company announced a $960 million acquisition of privately held rival Cumberland Resources yesterday. That is a pretty big purchase for a company with a market cap of just $4.53 billion and one would think the buyer's shares would trade lower. Throw in the fact that Massey said it expects to miss first-quarter profit estimates and one would have logically thought Wednesday would have been a good time to short Massey.
I will just say that I hope you did not short Massey after the close yesterday because that turned out to be a painful move today. Massey shares soared $2.93, or 5.83%, to close at $53.15 after touching a new 52-week high of $54.09 earlier in today's session. There was good reason for the move. As I mentioned in the Market Monitor, Massey said the Cumberland acquisition will help double its sales of metallurgical coal by 2012. Metallurgical coal is the place to be in the coal business. This is the stuff that is in high demand by steel producers in emerging markets such as Brazil, China and India. It is the future of coal and Massey shares responded to this news.
Massey Energy Chart
Emerging markets, save for Brazil, were stellar performers on Wednesday, led by a market that does not get a lot of press here in the States. I am referring to Indonesia. The Jakarta Composite Index gained 3.3% today, its biggest gain since July, according to Bloomberg News. I mention this because there is in fact a way for U.S. investors to play Indonesia's bullish ways and that is with the Market Vectors Indonesia Index (IDX). IDX is a thinly traded ETF, but it has nearly tripled in the past year and gained another 3.6% today to close at $70.79, just nine cents off the new 52-week high it set earlier today. Volume was nearly 50% higher than usual.
Taking a look at a more benign U.S.-based stock, athletic apparel and footwear giant Nike (NKE) should be worth watching on Thursday after the company delivered solid fiscal third-quarter results after the close today. Nike said it earned $4.96 billion, or $1.10 a share, on sales of $4.7 billion. Those results blew away the average analyst estimate, which called for the company to earn 89 cents a share on sales of $4.59 billion.
Apparel and shoe orders to be delivered between March and July rose 9% to $7.1 billion. Nike said consumer demand is picking up, even in Europe and the U.S., and not surprisingly, China and other emerging markets are helping Nike bolster its top and bottom lines as well. UBS said Nike increased its U.S. market share by 2% in the fiscal third quarter. Barclays Capital added that Nike is ''well positioned'' to be continue its industry leadership over the next several quarter. The stock closed at $70.88 today after hitting a new 52-week high of $71.33 earlier in the day. As of this writing, Nike shares are up, $2.46, or 3.47%, to $73.34 in after-hours trading.
Regarding other bellwether names, while it may feel like earnings season just ended and it did, another important earnings report will be delivered before the bell tomorrow. FedEx (FDX), the world's second-largest delivery company, is expected to report a profit of 72 cents a share for its fiscal third quarter. FedEx and rival UPS (UPS) are often viewed as temperature checks on the health of the broader economy, so comments from FedEx regarding pricing and shipping volumes will be what the Street is watching.
The basic premise here is that if more customers are opting for pricier FedEx services, such as Express shipping, that is a good sign for the economy. When the economy slumped, customers scaled back to traditional ground shipping or left FedEx for lower-cost alternatives. UPS said in February that its fourth-quarter profit almost tripled from the year-earlier period, so FedEx would do well to report similarly bullish results.
Transportation issues have been strong lately and that is good news for Dow theorists that believe moves in the transportation average confirm moves in the industrial index. The iShares Dow Jones Transportation Average ETF (IYT), of which FedEx is the second-largest constituent, made a new 52-week high today and is up almost 10% in the past month while FedEx shares are up nearly 11%. Another element of the FedEx earnings report to watch: Fuel costs. Higher oil prices could hinder the company's report and outlook and could do the same for the broader economy.
Looking at the charts, the Dow closed above the all-important 10,725 level and above its January peak. If not for another late-day sell-off, we could be looking at the Dow taking out 10,775 tomorrow. That could still happen, but triple witching volatility could be an issue on Thursday and Friday. The next few weeks could prove to be sluggish in terms of news flow for Dow stocks, but one story to watch is dividends. Over the next month, Exxon Mobil, Johnson & Johnson (JNJ), Pfizer (PFE) and Procter & Gamble (PG) declare their quarterly dividends and I would be surprised it at least one member of that quartet did not announce a higher payout. Next resistance for the Dow looms at 11,250.
The S&P 500 has made a nice move beyond the 1150 area and today's close should be encouraging for the bulls. Many eyes are probably starting to focus on 1200 as the next stopping point, but 1185 is the first hurdle to be cleared. Now that 1150 has evaporated as resistance, it should emerge as a support area for any potential selling stocks see in the coming weeks.
S&P 500 Chart
I do not want to say tech is looking ''tired,'' but it should be noted that on strong day for stocks, the biggest gainer in dollar terms in the Nasdaq 100 was Celgene (CELG), which was up $1.89. The Nasdaq was able to turn in another positive day and move closer to resistance just above 2400 despite the fact that Apple (AAPL), Amazon (AMZN) and Research In Motion (RIMM) were all down today and Google (GOOG) only chipped in a fractional gain. The Nasdaq has plenty of room to run to 2425 and the 2350 should provide firm support.
Stocks are strong, there is no getting around that and with the end of the first quarter just a couple of weeks away, I expect cash to continue to flow into equities as fund managers need to show clients strong first-quarter results. That performance will not be obtained through cash investments. A good sign for the bulls is that stock-specific catalysts are emerging again. The Massey and Nike news I highlighted earlier are two examples. FedEx needs to keep the ball rolling on Thursday.