Wednesday, April 16, 2008

It's All About Earnings

Wall Street shrugged aside more defeating economic news and focused instead on upbeat earnings reports from a number of key companies on Wednesday, boosting stocks on a day-long buying binge.

Results from JP Morgan (JPM), Intel (INTC) and Coca-Cola (KO) all beat analyst expectations handily as the bulk of quarterly earnings reports begin to flow from corporations to Wall Street.

Dow 12,619.27 +256.80; NASDAQ 2,350.11 +64.07; S&P 500 1,364.71 +30.28; NYSE Composite 9,203.76 +225.57

The rally was widespread, with 4976 advancing issues to just 1335 losers. The more startling development may be the shift in positions for new highs and lows. On the day, there were 197 new highs and 201 new lows, a very narrow, and generally insignificant, margin.

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What this may indicate is that Wednesday's rally could be the start of a broad move to higher ground, though there still is overhead resistance in the 12,700-12,750 area on the Dow. On the other hand, there is a voided area between 12,700 and 13,700, which could find itself occupied soon if the rally continues.

What will make the entire market move forward are improved earnings, like those seen today. While the price of oil continues to skyrocket, firms seem to be taking the unusual economic conditions in stride, largely unaffected by either slack US consumer demand or unbearably tight credit conditions.

Light, sweet crude oil gained $1.14, to another new record of $114.93 a barrel on the Nymex. In keeping with the tone of the day, gold added another $16.30 to close at $948.30, while silver gained 48 cents to $18.33.

The disconnect between the US economy and the stock market bears some inspection. How American companies can continue turning in solid profits in the face of a stagnant or slowing economy is just one of the implications of globalization. Many stocks listed on the major exchanges are global in scope and benefit from a weakened dollar in foreign markets, so it should not surprise anyone that these companies retain their competitive edge.

Companies that are more nationalistic, such as retailers, are seeing a harder time overall.

NYSE Volume 4,260,363,000
NASDAQ Volume 2,148,321,000

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