Morgan Stanley Raises Bar, Sends Market to New Heights

October 15, 2009

Strong earnings from a couple of industry bellwethers and a weaker US dollar brought about a concerted buying after that sent all three major indices to new 2009 highs.

Strong earnings from a couple of industry bellwethers and a weaker US dollar brought about a concerted buying after that sent all three major indices to new 2009 highs. Stocks lost a bit of their upward momentum as they headed into the close, but the Dow was still able to settle above 10,000 for the first time in one year.

Stocks traded solidly higher yestin broad-based fashion for the entire session. Their advance came on the heels of better-than-expected third quarter earnings from chipmaker Intel (INTC 20.83, +0.34) and diversified financial services outfit JPMorgan Chase (JPM 47.16, +1.50). For its part, Intel brought in $0.33 per share and also issued upside revenue guidance. JPMorgan brought in $0.82 per share for its latest quarter, even though it added $2.0 billion to consumer credit reserves, and said during its conference call that it hopes to raise its dividend back to $0.75 per share in the first half of 2010.

JPMorgan's report sent the broader financial sector to a 3.4% gain, which was better than any other sector this session. However, the bank's report set a high bar for peers like Bank of America (BAC 18.59, +0.78), which reports Friday.

Pharmaceuticals company Abbott Labs (ABT 51.20, +1.55) announced better-than-expected third quarter adjusted earnings of its own by bringing in $0.92 per share and went on to raise its fiscal 2009 guidance. That helped pharmaceutical stocks overcome continued weakness in shares of Johnson & Johnson (JNJ 60.55, -0.46) and drive the health care sector 1.5% higher.

Rail company CSX (CSX 47.06, +2.78) was one of this session's best performers following its upside earnings surprise of $0.74 per share. Fellow rail stocks shared in its strength and sent the industrial sector to a 2.6% gain, second only to financials.

Telecom was the only sector that failed to post a gain. Though its loss was fractional, this session marked the fifth time in the past six sessions that telecom underperformed.

Still, broad-based buying sent stocks to fresh highs for 2009. Since registering March lows, the Dow has climbed roughly 55%, the S&P 500 has jumped approximately 64%, and the Nasdaq has surged almost 72%.

Historically the indexes are trading higher above the 200 day moving averages since 1983 and continue to be susceptible to some kind of consolidation and or correction. Volume was heavier but noticeable lighter than the last leg up 1080 on the S&P which could mean further exhaustion of the move. We will have to see if continued earnings drive the market higher. Intel appeared to reverse on very high volume into the close which would appear to be some selling on the earnings news. All eyes are on Goldman Sachs this morning which is trading over 400% off its lows one year ago. It is probably best to let this stock come through a corrective pullback before considering any investment.

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