Thursday was one of those days where it was hard to be excited about the gains posted by the major indexes at the end of the session, but gains are gains and the slow grind higher keeps on, well, grinding after getting some support from solid economic data courtesy of the U.S. and Germany. Those data points also proved to be a boon for oil prices, which have now entered parabolic territory.
The weekly jobless claims number of 351,000 was the same as the prior week's reading, but that was still better than the 355,000 economists were expecting. More importantly, the four-week moving average, which is less volatile, fell 7,000 to 359,000, the lowest level since March 2008.
Germany's Ifo institute said its German business climate index, based on a survey of 7,000 executives, climbed to 109.6 in February from January's 108.3 beating the reading of 108.8 economists were expecting, Bloomberg reported. Remember, Germany is the European Unionâ€™s largest economy, one of the 10 largest economies in the world and an export-driven economy that needs oil.
That leads me to my next point of the aforementioned oil prices. NYMEX-traded crude for April delivery rallied $1.55, or 1.5%, to settle at $107.83 a barrel. In London, Brent crude added just over half a percent to settle at $123.62 a barrel.
Not to diminish what has been a string of nice gains for West Texas Intermediate, but as I am sure Jim mentions on OilSlick, Brent is the global benchmark. Brent over $120 a barrel is getting into an area where global equity markets are going to be concerned about oil prices crimping growth and where OPEC might need to consider boosting output.
Those geopolitical concerns require more examination than I can offer at the moment. What I can tell you is that for the first time in what feels like ages, the controversial U.S. Oil Fund (NYSE: USO) sharply outperformed the U.S. Brent Oil Fund (NYSE: BNO) today. Still, BNO was up, made another 52-week high and did so on impressive volume. Check out the chart.
In stock-specific news, shares of biotech firm Vivus (VVUS) surged almost 78% on volume that was almost 29 times the daily average after an FDA advisory panel voted 20-to-2 to approve the companyâ€™s experimental weight-loss drug, Qnexa. It should be noted that while impressive, that 78% gain is actually a pullback when considering Vivus shares doubled during the Wednesday after-hours session when the advisory panel vote was first reported.
The advisory panel vote puts Vivus in a strong postion to see Qnexa become the first weight-loss drug approved by the FDA in 13 years. The Vivus news also lifted shares of Orexigen Therapeutics (OREX), which is working on a competitor to Qnexa. Shares of Arena Pharmaceuticals (ARNA) were down on heavy volume, odd considering that company is also working on a rival to Qnexa. Qnexa has also completed Phase II clinical trials for type 2 diabetes and obstructive sleep apnea, but weight-loss is apparently what investors are paying attention to here.
In the laggards turned leaders category, there is the case of embattled Sears Holdings (SHLD). Remember way back when hedge fund legend Eddie Lampert acquired Sears and folks were proclaiming him the next Warren Buffett? Yeah, it is hard to remember that because Sears has not exactly turned out to be a Buffett-esque investment for Lampert. Then again, this deal was arguably a real estate grab, not an effort to turn Sears and Kmart around.
Problem with that is the market pays more attention to the bottom lines of Sears and Kmart than it does the real estate and that has plagued Sears investors, at least until recently. The shares soared almost 19% today on volume that was nearly triple the daily average after the company was able to assuage investors regarding liquidity concerns. The company expects to raise $400-$500 million through a rights offering that separate its hardware, hometown and outlet stores and raise another $270 million in a real estate deal.
As you can see, this stock has more than doubled this year after being one of the worst and most hated stocks last year.
Shares of retailer Kohl's (KSS) plunged almost 6% after the company forecast a first-quarter profit of 60 cents a share and full-year EPS of $4.75. Analysts were expecting 77 cents for the current quarter and $4.93 for the full year. The company said its fourth-quarter profit fell to $455 million, or $1.81 a share, from $494 million, or $1.66 a share, a year earlier. Revenue was flat $6 billion. Analysts expected a profit of $1.94 a share and revenue of $6.2 billion. Volume today was more than double the daily average. On the bright side, Wisconsin-based Kohl's boosted its dividend by 28% to 32 cents a share payable on March 28.
More earnings woes: Shares of Dow component Hewlett-Packard (HPQ) slid 6.5% today, a day after the company new CEO Meg Whitman did not exactly thrill the Street with results and outlook. The Thursday tumble made HP by far the worst performer of the 10 Dow losers. The company said its fiscal first-quarter profit fell to $1.47 billion, or 73 cents per share, from $2.6 billion, or $1.17 a share, a year earlier. Revenue fell to $30 billion from $32.3 billion. On an adjusted basis, HP earned 92 cents a share. Analysts were expecting 87 cents on revenue of $30.7 billion.
On the conference call Wednesday evening, Whitman cautioned investors that HP's turnaround story could take up to five years. Who in their right mind is going to wait for that? It is a good question to ask because five years is a obviously a long time and with a yield of just 1.6%, an investor will not really be compensated for his or her time waiting for the HP turnaround to materialize.
I say that not only because blindfolded any of us could pick 100 better stocks with better yields, but also because this company, aside from myriad obvious issues that negatively impact the share price, does not possess a rich dividend tradition. Sure, last year's 50% increase was nice, but that was first dividend increase by HP since 1997. Coca-Cola (KO) and Procter & Gamble (PG) HP is not when it comes to dividends and that makes the prospect of holding this dog for four or five years unappealing, at least to me.
Looking at the charts, the S&P 500â€™s close just over 1363 puts the index basically in the middle of trying to make a run at next resistance in 1375-1378 area and threatening to pullback to first support at 1350. I get the impression there is a decent amount of cash on the sidelines waiting for that pullback, but the danger is there are no guarantees the pullback will arrive. Should it show up and 1350 proves vulnerable, next support should be 1340.
S&P 500 Chart
The Dow traded in a range of about 114 points today, but even with all of that commotion, the blue chips did not peak above 13,000. Granted, the Dow tried, trading as high as 12,996 and as noted earlier, 20 of the 30 components were higher. Most of the gains came courtesy of PG, but I would not overlook IBM's move to $200. It is more a matter of when, not if. As Keene noted last night, it would be bullish to see the Dow move above 13,111 and concerning to see a retreat below 12,750.
The Nasdaq enjoyed a solid day and that is despite Apple gaining ''just'' 0.56%. Biotech fever certainly helped matters here, but the Nasdaq still needs to clear 2975 before addressing considerable round-number resistance at 3000. Look for support at 2900 and then 2850.
Overall, it is hard to not at least respect the marketâ€™s bullish way and it was nice to see U.S. and European economic data combine to help the cause, even if it was just one day of seeing that scenario. Hopefully, it serves as a reminder to investors everywhere that countries like the U.S. and Germany are far more important on the global economic stage than Greece. My newest position is VNM, which I added Tuesday.