Midsummer Night’s Dream!
A full-blown rally on Wall Street sweeping up both large and small stocks alike dominated trading screen yesterday, pushing the large Wall Street indexes to historic highs. Tech stocks, broke past a level they had been waiting to vanquish for a very long time – and they succeeded in that feat despite the fact that IBM clamped the Dow’s gains.
The tech sector (XLK) shot up above the all-time high recorded in the dot-com bubble in March 2000. The tech sector is the strongest sector on the year, having rallied 22.8%.
The energy sector (XLE), albeit the weakest sector on the year, didn’t disappoint this time, and helped the market break up. Crude jumped 1.6% to a 6-week high at the $47.12 barrel level. Crude traded up against the backdrop of a sharper than expected decline in U.S. reserve levels. It seems that the summer rally has gotten an adrenaline boost with the energy sector now the place to be for some investors. The XLE, the ETF on the sector, which had been trapped in a downward trend, closed yesterday above the 50 period EMA. In the event energy stocks can continue the positive momentum, that would give indexes a nice tailwind. The XLE closed up 1.5%, and above its 50 period EMA for the first time since January.
Despite the continuation of indexes’ year-to-date gains, some investors are anxious seeing that we haven’t seen a correction of at least 5% since August. Over the last 50 years, there have only been 6 years in which we have not seen such a price correction.
The stock of Vertex (VRTX) soared 26.4% to an all-time high of $167, a day after reporting positive test results for its Cystic Fibrosis treatment. The stock ended up 20.8% at the $159.69 level, making it the best performing stock on both the S&P 500 and the NASDAQ.
I.B.M. (IBM) was the biggest weight on the Dow, preventing the index from rallying after the company’s revenues came out beneath expectations. It’s been the 21st straight quarter in which IBM has disappointed Wall Street with its top-line numbers. Investors, in response, sent the stock to sharp losses of 4.1%, the stock ending at $147.53 after having hit a 13-month low at the $146.71 level earlier in trading.
Daily Summary: The Dow Jones recorded gains of 0.31%, the S&P 500 ending up 0.54%, the NASDAQ climbing 0.64%.
Analysts’ updated year-over-year S&P 500 forecast now calls for Q2 earnings growth of 8.7% and revenue growth of 4.6%.
Morgan Stanley (MS) soared 3.8% to the $46.62 level, after the bank reported better than expected results and a more moderate than expected decline in bond trading fees compared to its competitor, Goldman Sachs (GS).
It seems that bank results have been solid, but not good enough for investors to continue buying into the rally. Investors already knew to expect good earnings reports, but they had also anticipated a rate hike, something which would have been good for banks. A lot of expectation had already been priced into bank stocks, meaning that it’s hard for them to rally substantially now.
CSX fell 5.1% to the $51.87 level, after the train operator released its earnings forecast, which came out beneath the market consensus. The stock also dragged other sector stocks down. UNP fell 1.3%, KSU slipping 0.6%. The entire transportation sector was hurt. United Airlines (UAL) tumbled 5.9% to the $74.24 level after the Q3 revenue forecast for the company’s passenger unit disappointed investors.
About 5.78 billion shares traded hands on U.S. exchanges, compared to the 6.41 billion average over the last 20 trading days.
Thursday: Today’s earnings reports will include ABT, TRV, UNP, and SHW. The information security company, CHKP, will be reporting after closing. Similarly, investors will be responding after closing to earnings reports from MSFT, V, EBAY, and COF.
Investors will also turn their gaze to the European Central Bank, which, though not expected to hike rates today, is likely to talk about a change in its asset acquisition plans and ways to taper its quantitative easing initiative later this year.
The Economic Diary will feature weekly unemployment claims at 8:30 N.Y. time and the Philadelphia Fed manufacturing index at the same hour. The Leading Indicators index will be released at 10:00.
Thursday’s Hot Stocks: QCOM, AXP, TMUS, KMI, AA, ABT
IPOs: KALA, CLXT, YOGA
Have a great trading day!
|Tuesday||10:00||NAHB Housing Market Index||67||Medium|
|Wednesday||10:30||Crude Oil Inventories||–||Low|
Today’s Picks – Day Trading!
New York Strategy Swing
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No.1 – FIVE
|Company Name||Five Below|
|Sector||Services | Specialty Retail, Other|