Daily Wrap

DJIA +152.29 (+1.05%) to 14,719.46; S&P 500 +16.28 (+1.04%) to 1,578.78; NASDAQ +25.30 (+0.90%) to 2,835.37

Very strong day today in the market today with all major indices moving up roughly 1% or higher.  Today started with a gap higher and steadily climbed all day until 1pm EST when we saw a spike down.  We later realized the spike was caused by a false report by the AP, after their Twitter feed was hacked, that two bombs went off at the White House injuring the President.  Once the market realized the error they snapped back (whole process took a few minutes) but then still drifted slightly lower until the 2:30 pm EST when the S&P 500 finally bottomed and made its way back toward the highs of the day just falling roughly a point short.

In economic data there was nothing really ground breaking.  Manufacturing PMI came in slightly below expectations with a 52 reading while the Home Price Index (HPI) met expectations of a 0.7% rise from the prior month and New Home Sales came in just above the consensus forecast (417K vs 416K).  Tomorrow has Durable Goods and some Fed speak before we then get the usual Thursday Unemployment Claims data which I currently show a forecast of 352K.

Some insurance names were moving today and news and earnings as Travelers (TRV) gained over 2% on the day (but off the highs) after beating EPS and revenue handily pre-market.  I would personally not be entering new long positions on TRV here and today’s action, specifically TRV’s close well off the early morning highs, might be showing exhaustion in the move.  There is also clear negative MACD divergence in the name which even if it only prompts a consolidation would be worth waiting out in my opinion.  Also moving in insurance stocks today was MetLife (MET) which doesn’t officially announce earnings until after the close 5/1 but that didn’t stop them from coming out today and announcing an increase in their dividend from 18.5c to 27.5c.  MET closed up 5.45% on the news.

A big name winning on earnings today was Coach (COH) which beat on both revenue and EPS and closed 9.8% higher for the day.  Along with the earnings, COH raised their annual dividend to $1.35 which represents a 13% increase.  COH’s response today was strong and impressive but there could be more upside since COH, including today’s near 10% move, is over 25% off the 52 week highs.  I wouldn’t chase though and would be waiting to see a consolidation.

Another big name moving on earnings was Netflix (NFLX) whose report sent analysts raising price targets.  The highest I saw was JP Morgan with a $254 price target.  On the low side was Jefferies who downgraded the stock to Underperform after the report and raised their target to $160 from $130.  Clearly Jefferies has been negative on the name even before the report but they are holding their ground.  The note I saw was commenting on stretched valuations.  NFLX gained 24.44% closing at $216.99 on the day.

There was a rumor of Caesars (CZR) spinning off their growth assets and today we received the confirmation when they announced a joint venture partnership with Apollo (APO) and TPG Capital who plan on investing $500M ($250M each).  This JV will create a new entity, Caesars Growth Partners, which hopes to provide CZR capital to fund growth projects in a more flexible and less leveraged manner.

The following noteworthy companies are scheduled to report earnings before tomorrow’s open: PG, BA, LLY, SO, PX, TMO, GD, S, WLP, GLW, WM, MSI

In analyst notes today, I mainly focused on housing upgrades I found from Barclay but you can go to the link below to view those.  Also today we saw Morgan Stanley upgrade Bank of America (BAC) to Overweight with a $16 price target and JP Morgan upgrading Caterpillar (CAT) to Overweight with a $100 price target.  On the downside Bank of America/Merrill downgraded Yum! Brands (YUM) to Underperform.  Some of these and other upgrades and downgrades for the day can be found each morning when I post my 9 @ 9 in the Upgrades/Downgrades section.

Today’s action reached and ultimately exceeded the top end of my target/resistance zone.  I noted that if we stopped in that region we could be looking at a potential Head & Shoulder pattern which would roughly count down to $1480 on the S&P 500.  With today’s close above the noted potential left shoulder, it is less likely that is a pattern to focus on but it also doesn’t mean there is not the potential for downside.  I think the easy money was playing the bounce into the target/resistance zone and now I want to see the next few days of trading as well as if the MACD can recycle.  Also remember this is options expiration week.