Earnings Season in Full Gear, Stocks Lose Altitude

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By: Shlomo Cooper, Senior Analyst at Tradenet

Stocks on Wall Street fell on Tuesday, led lower by the financial sector (XLF) and the transportation sector (IYT), and some of the stocks which had performed the best after the presidential elections now find themselves losing altitude as the earnings season enters full gear. Another weight on stocks was concern about the protective trade policies set out by president-elect Donald Trump which dragged the U.S. dollar down to its lowest level in a month, and brought down U.S. T-bond yields.

In summary for the day, the S&P 500 slipped 0.3%, the NASDAQ falling 0.6%.

The financial sector (XLF), which has rallied since the elections on the background of expectations for higher interest rates and curbed regulation in a Trump administration, recorded its worst trading day since June 27th, leading the whole market lower. The XLF fell sharply by 2.3% on the day.

Morgan Stanley (MS) fell 3.8%, despite having doubled its Q4 earnings. In the meantime, we’re continuing to see a rally in 10 year T-bonds, and so there are potential headwinds for financial companies. The more bond yields fall, banks’ spread drops, meaning lower profits.

Biotech and pharma stocks fell after Trump said in an interview to the Washington Post that he’s setting his sights on pharmaceutical prices – and that he’s on the verge of revealing a plan to replace Obamacare, the signature accomplishment of the outgoing president. The biotech sector (IBB) fell 1.96%.

The transportation sector (IYT), which rallied after the November 8th elections, closed off by 1.1%. The stock of the rail service company, CSX, fell 3.4% in late trading after releasing its results for last quarter. CSX had already fallen 1.8% during regular trading.

On the S&P 500, 9 stocks rose to new 52-week highs, just one stock dipping to a new yearly low; on the NASDAQ, 57 stocks recorded new 52-week highs, 20 falling to new yearly lows.

About 6.7 billion shares changed hands on U.S. exchanges, above the 6.3 billion average over the last 20 trading days.

Wednesday: Consumer inflation is expected to surpass an annual level of 2% for the first time in 2 years, December’s figures to be released today before trading opens on Wall Street.

The CPI reading is expected to come to 0.3%, which would mean an annualized clip of 2.1%. This figure is expected to grab the market’s attention seeing that the Fed has long set its inflation target at 2%.

Investors are expected to also respond to the headlines coming out of Trump Tower and Washington D.C. today, seeing that disappointment is evident that the tax reform is likely to take longer than the market had anticipated. The Trump administration is now giving priority to the replacement of Obamacare, and traders are fretting that that could come at the expense of other executive activity. Some market strategists are saying that they don’t expect the Senate to debate tax reform until autumn. Until now, investors had only considered what Trump could do for them, and things were looking good. Now, though, investors are thinking to themselves: “What are we waiting for? What does it mean that he’s going to impose import tariffs? Why should we have to wait until February for tax reform?”

Besides consumer inflation figures at 8:30 N.Y. time, the other figures on the Economic Diary include industrial output at 9:15, the NAHB contractor confidence index at 10:00, and the Fed Beige Book at 14:00.

Fed Chair, Janet Yellen will be speaking in San Francisco at 15:00.

Wednesday’s Hot Stocks: CSX, UAL, GIMO, NBIX, GS

IPOs: None

Have a great trading day!


Economic Calendar
DAYTIME (EST)EventForecastImpact
Tuesday8:30Empire Manufacturing8.3Medium
Wednesday9:15Industrial Production0.6%Medium
Wednesday10:00NAHB Housing Market IndexMedium
Wednesday14:00Fed’s Beige BookMedium
Thursday8:30Initial Claims252KHigh
Thursday8:30Housing Starts1193KMedium
Thursday8:30Building Permits1217KMedium
Thursday8:30Philadelphia Fed15.3Medium
Thursday11:00Crude InventoriesLow


Earnings Calendar
EDUNew Oriental Education & Technology Group Inc.AMTuesday 
CMAComerica IncorporatedAMTuesday 
INFOIHS Markit Ltd.AMTuesday 
MSMorgan StanleyAMTuesday 
UNHUnitedHealth Group IncorporatedAMTuesday 
UALUnited Continental Holdings, Inc.PMTuesday 
CSXCSX CorporationPMTuesday 
FASTFastenal CompanyAMWednesday 
GSThe Goldman Sachs Group, Inc.AMWednesday 
CCitigroup Inc.AMWednesday 
KMIKinder Morgan, Inc.PMWednesday 
NFLXNetflix, Inc.PMWednesday 
CPCanadian Pacific Railway LimitedPMWednesday 
SLMSLM CorporationPMWednesday 
CHKPCheck Point Software Technologies Ltd.AMThursday 
UNPUnion Pacific CorporationAMThursday 
PPGPPG Industries, Inc.AMThursday 
BBTBB&T CorporationAMThursday 
IBMInternational Business Machines CorporationPMThursday 
AXPAmerican Express CompanyPMThursday 
TEAMAtlassian Corporation PlcPMThursday


Today’s Picks – Day Trading

O60.32 SNZEN
MNK 48.61  
NVDA 99.38  

New York Strategy Swing



StatuesDate CloseProfit \ Loss#DateStockLong \ShortStatuesDate CloseProfit \ Loss
1313.1.2017LWLongOpen -0.83%29      
14      30      
15      31      
16      32     


Today’s Picks – Swing “New-York Strategy”

No.1 – TRGP

Company NameTarga Resources
Entry Point60
Stop Area58.10
1st Target60.90
Swing Target
Avg. Volume2.04M
SectorBasic Materials | Oil & Gas Pipelines
Earnings Date
Risk RateHigh
Risk\Reward Ratio1.38:1

No.2 – TEVA

Company NameTeva Pharmaceutical
Entry Point33.50
Stop Area34.55
1st Target33.05
Swing Target
Avg. Volume10.34M
SectorFinancial | REIT – Retail
Earnings Date14 Feb
Risk RateNormal
Risk\Reward Ratio