Mixed Earnings Reports Bring Mixed Results

As earnings reports continue to beat analysts’ estimates at a rate just above 70 percent this quarter, Wednesday’s reports drove home the message that second quarter guidance has been steadily disappointing. This issue became a problem for Apple (AAPL) on Wednesday, when it took a brief dip below $400 per share because its downbeat guidance overshadowed positive earnings.

Wednesday’s big losers were Proctor & Gamble (PG) and AT&T (T) both of which declined in excess of 5 percent on disappointing earnings. Although both Boeing (BA) and Ford (F) beat analysts’ estimates, Boeing advanced 3 percent while Ford declined 0.22 percent due to losses in its European marketing efforts. The solar sector shined brightly following the introduction of a bipartisan renewable energy bill in the Senate.

The Dow Jones Industrial Average (DIA) dropped 43 points to reach 14,676 for a 0.29 percent decline. The S&P 500 (SPY) was flat on the day at 1,578.

The Nasdaq 100 (QQQ) dipped 0.04 percent to 2,834, although the Nasdaq Composite snuck into positive territory with a 0.01 percent advance to 3,269. The Russell 2000 (IWM) advanced 0.51 percent to end the day at 934.

In other major markets, oil (USO) skyrocketed 2.51 percent to close at $32.66.

On London’s ICE Futures Europe Exchange, June futures for Brent crude oil advanced by $1.53 (1.53 percent) to $101.84/bbl. (BNO).

June gold futures advanced by $21.30 (1.51 percent) to $1,430.10 per ounce (GLD).

Transports accelerated on Wednesday, with the Dow Jones Transportation Index (IYT) advancing 0.62 percent.

European stocks made another outrageous advance on Wednesday, despite the fact that Germany’s IFO Institute reported that its Business Climate Index for April declined to 104.4 from the March reading of 106.7 (EWG). In yet another example of the “Draghi put”, bad news became good news because European investors have apparently decided that the latest batch of disappointing economic reports will motivate the European Central Bank’s governing council to lower its key interest rate when it meets on May 2.

The Euro STOXX 50 Index finished Wednesday’s trading session with a 1.47 percent jump to 2,702 – remaining above its 50-day moving average of 2,644. 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 great day as the yen continued to fall against foreign currencies. “Yenny watch” continues as the yen has yet to fall to 100 per dollar, at which point it will become the yenny. The yen reached a low of 99.76 per dollar on Wednesday. A weaker yen results in more-competitive prices for Japanese exports in foreign markets (FXY). The Nikkei 225 Stock Average rose to its highest level since June of 2008, skyrocketing 2.32 percent to 13,843 (EWJ).

In China, stocks soared following news that the Reserve Bank of Australia will invest 5 percent of its foreign currency reserves in Chinese government bonds. The Shanghai Composite Index jumped 1.55 percent to 2,218 (FXI). Hong Kong’s Hang Seng Index surged 1.73 percent to 22,183 (EWH).

Technical indicators reveal that the S&P 500 remains above its 50-day moving average of 1,547 to close at Tuesday’s level: 1,578 – thwarting the possible formation of a souble-top (for now), which would have signaled a decline. Its Relative Strength Index ticked up to a healthy 56.41. Although the MACD remains barely below the signal line (suggesting the likelihood of a decline) the gap has almost disappeared, with both the MACD and the signal line near positive 5.

For the day, most sectors finished in positive territory. The materials, energy and industrials sectors led the way. The big losers were the healthcare and consumer staples sectors which sank in excess of 1.5 percent.

Consumer Discretionary (XLY): +0.06%

Technology: (XLK): +0.17%

Industrials (XLI): +1.01%

Materials: (XLB): +1.56%

Energy (XLE): +1.31%

Financials: (XLF): +0.54%

Utilities (XLU): +0.37%

Health Care: (XLV): -1.72%

Consumer Staples (XLP): -1.62%

Bottom line: Investor bullishness eased back on Wednesday as downbeat second quarter guidance from many companies dampened the previously-unbridled enthusiasm which has been rocking the markets.

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