1. Earnings reports stoked a vigorous rally, as semis, blue chips and telecoms digested good news from GM, Texas Instruments (TXN), Novellus (NVLS), Sprint (FON).
The "Buyers Strike" ended with a bang on the back of a gaggle of upbeat earnings reports, delivering the Nasdaq a 3.6-percent advance and the Dow industrials a gain of over 200 points.
Chip and telecom issues registered the most impressive upside following good news from Texas Instruments and Novellus Systems. Further, better-than-expected results from the likes of General Motors and Johnson & Johnson lit up the blue chips.
2. Good News from the U.S. Economy: Factory Production Up; Inflation Tame
Washington: U.S. industrial production rose in March at the fastest pace in 22 months, a sign manufacturing is adding to the economy's rebound from recession.
Production at the nation's factories, mines and utilities increased 0.7 percent during the month after rising 0.3 percent in February, according to the Federal Reserve. The third straight gain was led by the biggest rise in manufacturing since March 2000. Production is rising after businesses reduced stockpiles of unsold goods at a record rate in the fourth quarter of last year. Manufacturing ``will be one of the strongest contributors to growth this year,'' said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis. (Source: Bloomberg)
3. A Good Combo: Stocks Rally, Sending S&P 500 to Biggest Gain Since Sept.
Raised profit forecasts and the fastest increase in factory production in almost two years sent the Standard & Poor's 500 Index to its biggest gain since September; Better-than-expected results from companies spurred confidence in a corporate-profit rebound.
All 10 of the S&P 500 broad industry groups rose -- Good breadth from a diverse group of companies is needed for the market to continue higher. According to First Call, PC-related companies (Intel Corp., Microsoft Corp Apple, Dell, etc.) accounted for about a third of the S&P advance.
B)Today's Market:
4. Intel Says 1st-Qtr Earnings Rise; Sales Meet Forecast
The world's biggest semiconductor maker, said first-quarter net income rose and sales increased for the first time in five quarters on higher demand for chips that run PCs and servers. Sales of chips came in a little better than the company expected. Only negative: communications chips dropped more than predicted.
"They have done OK in a very difficult environment, probably one of the most difficult environments they will face in our lifetimes," said Marian Kessler, whose Rutherford Investment Management owns Intel shares and manages $100 million. (CBS Marketwatch)
5) Greenspan Testimony to Signal No Interest Rate Increase in May
Washington DC: Federal Reserve Chairman Alan Greenspan tomorrow will suggest the central bank is in no hurry to raise interest rates because corporate investment, hiring, and inflation are soft, analysts said. Greenspan, who generally tries to avoid surprising financial markets on monetary policy, will tell Congress's Joint Economic Committee his view hasn't changed over the past month: that the economy's recovery from recession will be gradual.
The unemployment rate rose in March, consumer optimism cooled, and spending slowed, suggesting the rebound may be losing momentum. With inflation low, analysts and investors are likely to interpret Greenspan's comments as signaling the Fed's policy- making Open Market Committee will hold the overnight bank lending rate at 1.75 percent when it next meets May 7.
"There are clear signs the economy is rebounding, but Greenspan will say that with core inflation under control, labor markets still weak and capital spending groping to stabilize, there won't be a hike in May," said chief economist at Banc of America Securities in New York. (Source: Bloomberg)
6) Generally good earnings
Motorola CEO Christopher Galvin predicts profitibility in 2H, ending a 5Q string of losses at the world's No. 2 mobile-phone maker. Recipe for a rebound: new phones, a smaller workforce and able lieutenants.
Among other postclose earnings news, the majority of firms posted in-line or better-than-expected results. Among those in the latter category were Boston Scientific (BSX:NYSE), Harley Davidson (HDI:NYSE), Capital One Financial (COF:NYSE) and Kraft Foods (KFT:NYSE). (Source: CBS Marketwatch)
Lastly, the one know risk factor -- but good for your oil holdings:
Crude prices up after huge stock drop
A 7.3 million-barrel drop in U.S. crude inventories as of the week ended April 12 pulled crude futures prices back above $25 a barrel in after-hours trading. May crude was up 45 cents at $25.20 a barrel following the American Petroleum Institute's weekly data. Gasoline supplies also rose by 723,000 barrels in the latest week, the API said, while distillate supplies, which include heating oil, fell by 1.88 million barrels. May unleaded gasoline was up 0.71 cent at 80 cents a gallon and May heating oil was up 0.87 cent at 64.65 cents a gallon. (Source: Reuters)
C) What might happen Tomorrow?
The Nasdaq Comp is trying to form a double-bottom at about a 50% retracement of Sept to Jan rally.
The Key to the Double Bottom: This whole last leg down has been a kind of slow, low volume grind, showing an overall lack of buying interest rather than intense selling.
On the S&P500, we see a double bottom with higher low.
Tuesday's action was key -- but I want to see the follow-through day before we all get too excited. A follow-through day would be four to nine trading days from Tuesday, showing a rise of greater than 1% on the major indexes, on rising, above average volume. Ideally, I'd really like to see over two billion shares trade on the COMP on such a day. That would signify a real change in character.
Unless/until we see some volume surges on the Indices, we'll expect that this near-term rally will be tradable, but will not necessarily represent longer-term change of character.
• Options Expiration is on Friday; That suggests some of this may be short covering -- (but so what?)
-Barry Ritholtz
April 17, 2002
If you would like a free subscription to my bi-weekly market comments, please send an email to
Ritholtz@aol.com, including the word "SUBSCRIBE" in the subject matter line. Previous market comments are archived
here.
Copyright © 2001 Barry L. Ritholtz, All Rights Reserved worldwide. May
not be copied, stored or redistributed without prior, written permission.
Home
