Earnings Season Finishing Up

July 27, 2009
Mike Doran

The market started on a weaker note Friday with the recent leading Nasdaq pacing the way to the downside following some disappointing earnings (MSFT, AMZN, BRCM). A minor push off the low did not benefit from a slightly upwardly revised Mich Sentiment report with the S&P setting a new session low thereafter. This move was not confirmed by the Dow and Nasdaq reflecting diminishing sector pressure and the S&P held at a short term support (14:08 update) with it pushing slowly but steadily up toward Thursday's high into the close.

The Nasdaq 100/Comp rallied firmly off the morning low but failed to reach unchanged leaving the session to end on a mixed note. Sectors pacing the way on the upside included: Airline +4.5%, Coal +3.2%, Paper +3.2%, Casino +3.1%, Health Provider +2.2%, Pharma PPH +1.9%, Insurance +1.8%, Medical Equipment +1.8%, Health XLV +1.7%, Oil Service OIH +1.5%, Biotech IBB +1.5%, Utility +1.3%.

Losing sectors included: Software -3.6%, Internet HHH -2.8%, Rail -1%, Telecom -0.8%, Reg Bank -0.7%. The Nasdaq Comp had its 12 session win streak broken but pressure here was limited as it formed an inside day (lower high, higher low) and ended near the best level of the day. This minor selling in conjunction with the ability of the S&P to end near its session/weekly high is a potential positive for early next week but some short term technicals/patterns suggest watching for signs of a possible breather. Next resistance is in the 984/985 area.

The week ahead will be supply driven, as the treasury market wades through record levels of issuance, including bumped up amounts of notes, with auctions of $32B 3-mo, $31B 6-mo and $6B 20-yr TIPS Mon, $27B 1-yrs and $42B 2-yrs Tues, $39B 5-yrs Wed and $28B 7-yrs Thurs. There will be batches of global supply flooding trade as well, which could make for a pretty treacherous week. The week kicks off with new home sales with a few data-mines scattered through the week.

Talk of slowing TAF and other bailout measures has been heating up, with Bernanke confirming today, while the BOE saw another zero purchases in its offer to take corporate bonds off of players hands, both issues that point to recovery and an unwinding of bailout mechanisms. 80% of the S&P will report earnings by weeks end which should provide additional clues as to the expectations of any future growth before year end and should set the tone for stocks going into the remainder of the Summer.