Daily Wrap
DJIA +62.51 (+0.46%) to 13,712.21; S&P 500 +6.58 (+0.44%) to 1,492.56; NASDAQ +8.47 (+0.27%) to 3,143.18
Today was an interesting day. 4 Dow names reported before the bell but due t their mixed nature it didn’t seem to help provide any conviction either way so the market erred on the being down side. After wavering for the early part of the day the S&P finally pressed into positive territory around lunch and then started a trek higher closing up over 6 points for the day. In economic news, US existing home sales came in below estimates for December and the Richmond Fed Manufacturing survey looked to be well below estimates coming in at -12.
As I noted above there were 4 Dow companies that reported earnings before the open and while I am not a big believer/follower of the Dow that is not a knock on the companies themselves but just the index not really being a representative of the broad economy. Travelers Cos. (TRV) was one of the 4 that reported and beat on the top and bottom line but that may also be somewhat misleading due to the expectations had been lowered by many due to Hurricane Sandy and TRV noted that Q4’s profit was down over 50%. TRV moved higher today on a realization that “it wasn’t as bad as we thought”.
Johnson & Johnson (JNJ) was the only one of the 4 that reported that closed lower but it was only fractionally so (-0.74%). JNJ beat on the bottom line but was slightly light on revenues. More importantly JNJ guided below wall street estimates for 2013 but it is a significant increase from this year coming in at $5.35-.45 vs estimates of $5.49. That is close enough that you could argue the company could end up at or above estimates by year end and possibly was the rational on why the name didn’t get hit much.
DuPont (DD) rose after handily beating earnings estimates on both the top and bottom line and more importantly, to me at least, was they guided above analyst expectations for both EPS and revenue. In fact, for EPS, DD’s low end estimate was above the current analysts consensus. That is the way to get them to their feet. The numbers DD announced for 2013 were EPS $3.85-4.05 (vs consensus of $3.84) on $36B (vs consensus of $35.99B). What a change a couple months can made after DD saw a large gap down in October 2012 and continued down until the entire market bottomed in November. While not completely back to where it was, it has fought back much of the ground admirably.
Lastly, Verizon (VZ), reported mixed results by missing analysts expectations for EPS but beating revenue. Even when you add back in the 7c VZ said Sandy caused it looks like they missed but Wall Street didn’t mind as they sent VZ almost 1% higher today.
Also in the news today was Microsoft (MSFT) which according to CNBC’s David Faber, is willing to invest $1-3B to help with the leverage buyout of Dell (DELL). This sent shares of DELL of over 2% today and this definitely looks like it could happen. MSFT benefits with their relationship with DELL and a strong DELL helps MSFT sales. Also if the $1-3B number is correct, MSFT has roughly $66B in cash so the amount of their involvement is minimal to their situation. Also as I have seen noted in some reports, Silver Lake (the company leading the LBO) and MSFT were in talks to team up when MSFT was eyeing Yahoo (YHOO) and Silver Lake was involved on the selling side of Skype to MSFT so they are not strangers.
Last name for today but as always with earnings season you could spend much much more time is Research In Motion (RIMM). RIMM closed up over 13% today on news from the CEO that RIMM might look to license the BB10 OS and then to pump things even more Scotia Bank came out and upgraded the price target on the name to $23 from $18.60. RIMM was a past trade idea of mine that I said goodbye to around $10 after a solid gain. RIMM continued to about $12 and then I highlighted it again on a drop back to support but again for a quick trade. After the drop in December I didn’t expect to see the name recover this much this fast. Congrats to anyone that was able to stay in the name for longer!
As always you can visit the Event’s Calendar for the release of economic data, scheduled meetings and other news that could move the market.
According to Briefing.com, the following noteworthy companies are scheduled to report earnings before tomorrow’s open: ABT, CHKP, DGX, FCFS, STJ, TXT, APD, BHI, FNFG, MCD, COH, MOLX, SAP, UTX, ATI, GD, LCC, MSI, PX, RES, ROL, NVS, FMBI, TEL, WLP, ABBV
Today when the market was faced with some negative news, mixed earnings and overall lack of conviction, it decided to go higher. This is why while I think it is prudent to review overall size of trades and consider lowering exposure to not give back and hard fought gains especially since the November 16th bottom, I also say lowering size and continuing to play the trend is better than just jumping out. Timing tops and bottoms can be hard and while they feel oh so good you also can make a lot living in the middle and personally that’s where I prefer to spend the majority of my time. Looks like the S&P 500 has room to continue higher but for the shorter term minded we could be approaching some resistance toward 1500 which might provide a tradable top of 10-25 points or so.
