Daily Market Update – April 16, 2015

 

 

 

Daily Market Update – April 16, 2015  (9:00 AM)

 

With Citibank and Goldman Sachs reporting earnings this morning, they were in line with other major money center bank reports and so all seems well in the financial sector, as we get ready to move forward to the rest of the S&P 500.

So far the week is trading flatly, but that may be a little bit of a victory considering that this quarter will likely continue to be characterized by decreased guidance, decelerating growth in earnings and continued fears about currency.

All of those will also be happening in the context of the possibility of rising energy prices, but at least for the moment we’re not fretting about when interest rate rises will be coming.

What hasn’t been discussed at all, although may still be forthcoming when companies like Dow Chemical report, is what the impact of lower energy costs have been on their bottom lines. To this point we haven’t really seen any evidence of the hypothetical benefits of decreased energy costs, even though they have to be real.

When you consider that at some point the ability of stock buy backs to prop up EPS data is going to have to wane, there has to be something else to propel EPS or the market is going to be in for some major disappointment.

Since the most common way to cut costs and drive up the bottom line is to cut the workforce, that’s not a very good alternative means to grow EPS. It never is, but it would be even worse if coming before anyone  ever gets to believe that the marketplace ever even recovered from the 2008-9 drop in employment.

If lower energy costs won’t be the bump necessary to offset decreasing share buy backs, we had better hope that the dollar starts to demonstrate some weakness and that interest rates stay low, even though some rise in interest rates would probably be a good thing for the economy.

But all of that is way too esoteric this morning.

We’re 2 days from the end of the April 2015 option cycle and we still have 2 weeks of trading for the month to live up to its hype of being among the best for the market year in and year out. So far the S&P 500 is up 2%, so it is doing its part when you realize that YTD the market is up only 2.3%.

With this morning’s Housing Starts number being on the light side the market isn’t capitalizing on the Citibank and Goldman Sachs news as it gets ready to open for trading. Instead it is erasing yesterday’s moderate gains and then some.

Hopefully there will be enough moderation in selling to let this week end with enough assignments to fund any buying in the coming weeks as we continue to try and figure out what there is out there that can push markets ahead.

For now, bottom lines that aren’t as bad as we had expected is a good enough reason for stocks to move higher. But that isn‘t the sort of excuse that has lasting power.

Unfortunately, an increase in subscriber numbers to Netflix, the kind that can give a 12% pop to shares in the pre-open, isn’t the kind of thing that finds its way trickling down to the rest of the market.

Someone else will have to do the heavy lifting while others watch House of Cards, but they need to move up soon, before we get tired of hearing the
same old “better than expected” refrain to characterize lower earnings and decelerating growth.

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Daily Market Update – April 15, 2015 (Close)

 

 

 

Daily Market Update – April 15, 2015  (Close)

 

Over the course of Wednesday and Thursday there will be no fewer than 7 speeches being given by Federal Reserve Governors, any of which could get enough attention to cause some shifts in the market. Considering that there isn’t really any compelling reason to believe that the economy is getting so heated that interest rate hikes are going to be necessary very soon, for the most part, however, those seven speeches should be offering nothing new.

In the meantime earnings will continue having now gotten off to a decent start.

With Bank of America reporting this morning and being roughly in line with expectations there will be more to come from Citibank, Morgan Stanley and Goldman Sachs and after those we’ll have a good idea of where the financial sector has been and where it thinks it may be going. At least from what we’ve heard so far the past quarter was just a sleepy one that still paid all of the bills and left a little something over for everyone’s efforts.

That’s no small accomplishment for banks when interest rates are so low, so there is something positive coming out of even mediocre kind of earnings reports.

Of particular importance yesterday were Johnson and Johnson, before trading started and Intel, after trading ended.

Different businesses for certain, but both have significant stakes overseas and both reported significant currency related issues decreasing their bottom line.

More importantly after both cut guidance for the coming quarter due to the expectation of continuing currency head winds the market didn’t act surprised and didn’t punish the companies on top of whatever has already been factored into their prices. 

While it would seem logical for it to not over-react to news that had been widely expected, you wouldn’t be overly confident in predicting a calm and rational response if you factored in past responses to what were widely expected events.

I still think back to the winter of 2014 when retail stocks were feeling the pressure of the bad weather and their share prices went lower in expectation of what would eventually be reported. Then when the reports became reality they all went down sharply as if it was the first time anyone had considered that weather could have been an earnings factor.

Sometimes you just look for good news wherever you can find it and so far, the restrained response to reduced guidance is promising.

If looking for a catalyst to drive the markets higher it may not require anything more than simply wiping the collective brow of the market in relief that the earnings and forward guidances being given just aren’t as bad as we had all been expecting.

As we come up on the middle of the week and the end of the monthly option cycle now easily in sight, I would just like to see the next few days at least tread water so that the week can end with a combination of assignments and rollovers that is skewed toward more assignments.

Today, the market did more than just tread water, even as it lost some steam in the final 30 minutes of trading.

That was despite a sharp climb in energy prices that was to the same level as the recent 5% decline, neither of which seemed to matter, despite the superficial importance that was attached to those gyrations when they first started months ago.

It’s unlikely that there will be any additional new purchases for the week, but as always, it’s hard to stick to the script if an opportunity appears to pop up. But otherwise, I would be happy to raise some cash to be in a better position to take advantage of any future opportunities that may be awaiting next week.

Today’s market just gave a little bit an added cushion while awaiting Friday and happily offered some chance to sell some more calls on uncovered positions.

Hopefully some of the paper gains today will become realized gains sooner rather than later.

 

 

 

 

 

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Daily Market Update – April 15, 2015

 

 

 

Daily Market Update – April 15, 2015  (8:00 AM)

 

Over the course of the next two days there will be no fewer than 7 speeches being given by Federal Reserve Governors, any of which could get enough attention to cause some shifts in the market. Considering that there isn’t really any compelling reason to believe that the economy is getting so heated that interest rate hikes are going to be necessary very soon, for the most part, however, those seven speeches should be offering nothing new.

In the meantime earnings will continue having now gotten off to a decent start.

With Bank of America reporting this morning and being roughly in line with expectations there will be more to come from Citibank, Morgan Stanley and Goldman Sachs and after those we’ll have a good idea of where the financial sector has been and where it thinks it may be going. At least from what we’ve heard so far the past quarter was just a sleepy one that still paid all of the bills and left a little something over for everyone’s efforts.

That’s no small accomplishment for banks when interest rates are so low, so tere is something positive coming out of even mediocre kind of earnings reports.

Of particular importance yesterday were Johnson and Johnson, before trading started and Intel, after trading ended.

Different business for certain, but both have significant stakes overseas and both reported significant currency related issues decreasing their bottom line.

More importantly after both cut guidance for the coming quarter due to the expectation of continuing currency head winds the market didn’t act surprised and didn’t punish the companies on top of whatever has already been factored into their prices. 

While it would seem logical for it to not over-react to news that had been widely expected, you wouldn’t be overly confident in predicting a calm and rational response if you factored in past responses to what were widely expected events.

I still think back to the winter of 2014 when retail stocks were feeling the pressure of the bead weather and their share prices went lower in expectation of what would eventually be reported. Then when the reports became reality they all went down sharply as if it was the first time anyone had considered that weather could have been an earnings factor.

Sometimes you just look for good news wherever you can find it and so far, the restrained response to reduced guidance is promising.

If looking for a catalyst to drive the markets higher it may not require anything more than simply wiping the collective brow of the market in relief that the earnings and forward guidances being given just aren’t as bad as we had all been expecting.

As we come up on the middle of the week and the end of the monthly option cycle now easily in sight, I would just like to see the next few days at least tread water so that the week can end with a combination of assignments and rollovers that is skewed toward more assignments.

It’s unlikely that there will be any additional new purchases for the week, but as always, it’s hard to stick to the script if an opportunity appears to pop up. But otherwise, I would be happy to raise some cash to be in a better position to take advantage of any future opportuni
ties that may be awaiting next week.

 

 

 

 

 

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Daily Market Update – April 14, 2015 (Close)

 

 

 

Daily Market Update – April 14, 2015  (Close)

 

It started this morning with Johnson and Johnson reporting, then followed by JP Morgan and Wells Fargo.

Those three have a combined market capitalization that so large that it’s even about 10% larger than that of Apple.

But the good news is that the first 2 major banks to report did nothing to surprise markets and actually beat on revenues.

Johnson and Johnson, which was the first of this season to report with significant currency considerations did report the effects of the stronger dollar and did reduce forward guidance, but as expected, investors were prepared to hear that kind of news. More importantly, the news wasn’t so bad as to have exceeded those expectations.

That’s a good start for what may still be a challenging few weeks ahead, but at the very least the major banks do very often at least set a tone when they’re not behaving badly and thus far this morning the behavior is unremarkable and restrained.

The market too, during its pre-open futures trading is equally restrained and unremarkable.

Given the 3 options of behavior that existed as earnings season gets underway, the same 3 options that exist every day, being restrained and unremarkable can be a good one, if it’s sustained for a while and if any deviations from restraint are soon brought back into line.

Given a portfolio of holdings, some of which are covered, some of which are longing for cover, you can have different hopes for what trend the broader market will be following.

If I had all positions covered I would love seeing a restrained, unremarkable and flat market with occasional punctuations higher and lower. That would make a nice environment for rollovers. That’s the best of all situations when you just roll over position after position and see the income come in on a regular basis.

But when there are uncovered positions the hope is for the ability to see new cover and that typically requires the kind of high tide that pulls everything along. That usually also leads to assignments and rollovers, as well.

So with all of those uncovered positions a flat and restrained market just won’t do it.

While it’s definitely better than a downward moving market at this moment, I’d still like to see this morning’s earnings reports perhaps be the first among a series of non-disappointing reports, that could perhaps serve as the fuel for a move higher.

Until more positions are covered there’s no reason to want to see a lower move by the market. Those are nice to have when you’re sitting on a pile of cash or had a large portion of your holding suddenly called away by a large move higher.

I don’t think that’s going to be the case, although this week’s expiring positions are still in good shape for assignment if the market can avoid any large move lower.

This morning’s early indications following the earnings releases of Johnson and Johnson, JP Morgan and Wells Fargo at least gave some hope for the prospects of the rest of the week. It was nice to see the market trade
reasonably well for the day, especially continuing some recovery in energy positions after the rough day last Friday.

With Intel releasing its earnings this afternoon and the post-sessions market’s first response being a positive one, there’s at least some hope that currency headwinds won’t be the kind of drag that was feared, although there’s still lots more to go.

 

 

 

 

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Daily Market Update – April 14, 2015

 

 

 

Daily Market Update – April 14, 2015  (8:30 AM)

 

It started this morning with Johnson and Johnson reporting, then followed by JP Morgan and Wells Fargo.

Those three have a combined market capitalization that so large that it’s even about 10% larger than that of Apple.

But the good news is that the first 2 major banks to report did nothing to surprise markets and actually beat on revenues.

Johnson and Johnson, which was the first of this season to report with significant currency considerations did report the effects of the stronger dollar and did reduce forward guidance, but as expected, investors were prepared to hear that kind of news. More importantly, the news wasn’t so bad as to have exceeded those expectations.

That’s a good start for what may still be a challenging few weeks ahead, but at the very least the major banks do very often at least set a tone when they’re not behaving badly and thus far this morning the behavior is unremarkable and restrained.

The market too, during its pre-open futures trading is equally restrained and unremarkable.

Given the 3 options of behavior that existed as earnings season gets underway, the same 3 options that exist every day, being restrained and unremarkable can be a good one, if it’s sustained for a while and if any deviations from restraint are soon brought back into line.

Given a portfolio of holdings, some of which are covered, some of which are longing for cover, you can have different hopes for what trend the broader market will be following.

If I had all positions covered I would love seeing a restrained, unremarkable and flat market with occasional punctuations higher and lower. That would make a nice environment for rollovers. That’s the best of all situations when you just roll over position after position and see the income come in on a regular basis.

But when there are uncovered positions the hope is for the ability to see new cover and that typically requires the kind of high tide that pulls everything along. That usually also leads to assignments and rollovers, as well.

So with all of those uncovered positions a flat and restrained market just won’t do it.

While it’s definitely better than a downward moving market at this moment, I’d still like to see this morning’s earnings reports perhaps be the first among a series of non-disappointing reports, that could perhaps serve as the fuel for a move higher.

Until more positions are covered there’s no reason to want to see a lower move by the market. Those are nice to have when you’re sitting on a pile of cash or had a large portion of your holding suddenly called away by a large move higher.

I don’t think that’s going to be the case, although this week’s expiring positions are still in good shape for assignment if the market can avoid any large move lower.

This morning’s early indications following the earnings releases of Johnson and Johnson, JP Morgan and Wells Fargo at least give some hope for the prospects of the rest of the week.

&nbs
p;

 

 

 

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