Earnings Reports And Initial Unemployment Claims Feed The Bulls

The flow of positive earnings reports was augmented on Thursday, with a better-than-expected drop in initial unemployment claims. By mid-afternoon, it was beginning to appear as though the S&P 500 was headed for another record high. Thursday’s big winners on earnings were Akamai Technologies (AKAM) and Cliff’s Natural Resources (CLF). Their share prices advanced by 18 percent and by 15 percent, respectively. The Cheesecake Factory (CAKE) jumped 5 percent after beating earnings expectations by a nickel at 47 cents per share. Once they figure out that their meal portions are too damned large, their earnings will be 47 dollars per share.

Thursday’s most publicized losers were 3M (MMM) and Exxon Mobil (XOM). 3M fell 3 percent on an earnings miss which fell 4 cents short of analysts’ estimates of $1.65 per share. Although Exxon Mobil beat estimates by 7 cents with earnings of $2.12 per share, its revenue fell $11 billion short of the $119 billion estimate.

The Dow Jones Industrial Average (DIA) picked up 24 points to reach 14,700 for a 0.17 percent advance. The S&P 500 (SPY) rose 0.40 percent to close at 1,585.

The Nasdaq 100 (QQQ) advanced 0.51 percent to 2,848. The Russell 2000 (IWM) climbed 0.70 percent to end the day at 940.

In other major markets, oil (NYSEARCA:USO) had another huge day, skyrocketing 1.81 percent to close at $33.25.

On London’s ICE Futures Europe Exchange, June futures for Brent crude oil advanced by $1.54 (1.51 percent) to $103.27/bbl. (NYSEARCA:BNO).

June gold futures advanced by $39.60 (2.78 percent) to $1,463.30 per ounce (GLD).

Transports were stuck in second gear on Thursday, with the Dow Jones Transportation Index (IYT) advancing 0.11 percent.

European stocks struggled to remain in positive territory on Thursday as Britain managed to avoid a “triple dip” recession when its first quarter GDP expanded by 0.3 percent (EWU). The good news was offset by a horrific report from Spain that its unemployment rate rose even further during the first quarter to reach 27.2 percent (EWP).

The Euro STOXX 50 Index finished Thursday’s trading session with a 0.09 percent advance to 2,704 – remaining above its 50-day moving average of 2,646. After breaking above its overhead resistance level of 2,700 on January 21, the STOXX 50 is again testing resistance at that level, which has been a barrier since the beginning of the year.

Japan’s stock market had a another good day, despite a slight strengthening of the yen against the dollar. A stronger yen results in less-competitive prices for Japanese exports in foreign markets (FXY). The Nikkei 225 Stock Average rose to its highest level since 2008, climbing 0.60 percent to 13,926 (EWJ).

In China, concern that the Chinese government is about to embark on another wave of property tax enthusiasm raised fears about the consequences to real estate enterprises on the Shanghai Stock Exchange. The Shanghai Composite Index fell 0.86 percent to 2,199 (FXI) although Hong Kong’s Hang Seng Index surged 0.98 percent to 22,401 (EWH).

Technical indicators reveal that the S&P 500 remains above its 50-day moving average of 1,548 with a close at 1,585 – motivating bears to watch for the possible formation of a double-top, which would signal a decline. Its Relative Strength Index ticked up to a healthy 58.27. The MACD has finally crossed above the signal line, suggesting the likelihood of a further advance.

For the day, all sectors finished in positive territory, except for the utilities sector, which dipped by only 2 basis points. The materials and consumer discretionary sectors led the way, with the latter getting a boost from a better-than-expected report on initial unemployment claims.

Consumer Discretionary (XLY): +0.89%

Technology: (XLK): +0.33%

Industrials (XLI): +0.53%

Materials: (XLB): +1.05%

Energy (XLE): +0.10%

Financials: (XLF): +0.54%

Utilities (XLU): -0.02%

Health Care: (XLV): +0.40%

Consumer Staples (XLP): +0.27%

Bottom line: Stocks resumed their advance on Thursday after a better-than-expected drop in initial unemployment claims was accented with some impressive earnings reports and served-up as the Bulls’ Delight.

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