More Bull Ahead?
Better-than-expected earnings from Merrill Lynch and storage-king EMC helped
trigger a broad-based rally that left all three major averages above their
respective 50-day moving averages. For the day, the Nasdaq added 3.0%, the Dow
gained 0.7%, and the S&P 500 rose 1.3%.
Volume accompanied the up day in stocks with the Nasdaq trading 2.26 billion
shares which was about 11% more than Monday. NYSE volume increased about 10%,
with 1.20 billion shares changing hands. While Tuesday’s volume remained
somewhat tame, traders were happy to see the levels improve over Monday.
Stocks managed to increase despite the recent slew of new earnings warnings
and Monday’s 0.6% decline in the Index of Leading Economic Indicators, and that
led many traders to conclude that the market’s psychology has definitely
shifted.
“The tone of the market has definitely firmed. The market is telling you
that people are looking for reasons to buy stocks. They’re willing to look past
a quarter or two in earnings, and the anticipation being that there’s a lot of
money on the sidelines and people want to put it to work,” said Gregg
Parise, General Partner, Dorado Capital Management.
“We’ve had a big move off the bottom in terms of a huge percentage gain,
and I think that the easy money has been made. I think now we have to kind of
sit back and let this market digest. The rising tide kind of lifted all boats
again, and I think we are now going to see a little more discernment. Over time,
you’re going to continue to see rotation into the good, solid leaders,” he
added.
Top sectors were Internets
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up 6.5%, and airlines
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On the weak side were pharmaceuticals
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and silver
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Leading the broker/dealers
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which posted fourth quarter earnings of 93 cents per share that topped analyst
estimates by 5 cents. Merrill jumped 4 7/8 to to an all-time high 79 15/16 on
double average volume.Â
Strength in global brokerages like Merrill often signals good future
prospects for the broader market since brokers are so dependent upon
underwriting fees, commissions, and lower interest rates.
Top biotechs were Vertex
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up 13%, and Gilead Sciences
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Tech rockers included Q-Logic
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Vitesse
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Dow winners were Intel
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3%, while Disney
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PowerRating) was the weakest, falling 4%.
Looking ahead, the Employment Cost Index for the fourth quarter will be released on Thursday at 8:30 AM ET and analysts expect an increase of 1.1%. Also Thursday is a much anticipated performance of Greenspan
on the Hill. Stay Tuned.