US Government shuts down and gains open up
Index & Sector performance 10/01/13
The Market:
The old market adage Buy the rumor and Sell the news is somewhat in affect here today with the markets reaction to the Government shutdown. As we noted in last night’s Game Plan, with the realization of the shutdown now in affect and the worry of the shutdown gone, short term longs would look for opportunity to trade a bounce. A gap up was quickly consolidated after roughly 30 minutes of trading and then pressed higher until 12:30 pm EST. After 12:30 there was a roll over which took the index down until …..
In economic news, Manufacturing PMI came in as expected but ISM PMI and Prices both came in better than expected. Tomorrow we get ADP number and some Fed speak.
All green across the WSC Scoreboard today with Healthcare (XLV) leading the way. Inside the index the big gainers were Mylan (MYL) gaining 3.35% on news of launching the first generic version of Pfizer’s (PFE) VFEND for Oral Suspension. Also moving higher was Cerner (CERN) gaiiniing 2.7% on the day which was a follow-up to Friday’s strong trading after announcing a partnership with hospital and clinic operator Intermountain Healthcare.
Story Stocks:
What’s good for Wall Street is not always good for main street and Merck (MRK) today is an example of that announcing they will be cutting thousands of jobs especially in research & development which will yield roughly $2.5B in annual net cost savings. Shares gain X% on the day.
General Motors (GM) announced an 11% decline in Auto Sales while Ford (F) reported a 5.8% increase which was better than expected. The news sent GM down X% and F up X% for the day.
Some companies are still reporting earnings and Walgreen (WAG) closed up X% on the day and only X% away from a 52 week high after topping analyst expectation in EPS (73c vs 72c) and reporting just slightly below revenue expectations (17.94B vs 17.95B).
The following noteworthy companies are scheduled to report earnings before tomorrow’s open: MON
Analyst Comments:
Upgrades 10/01/13
Downgrades 10/01/13
Initiations 10/01/13
Price Target Changes 10/01/13
The Game Plan:
As noted last night, with the Government shutdown a reality and no longer a fear it was strongly possibly to see a bounce from the recently oversold position. What the bounce needs to show is that it has legs and can hold the recent lows. From there we may be able to set-up a broader consolidation and push to higher levels. I would not be using the recent $1675 lows as a stop and would likely give it a shorter leash at $1685. Above $1696.55 and then $1708 with volume and we may be able to challenge the highs like the Russell 2000 (IWM) and Nasdaq (QQQ) have recently done. One thing to also keep watching is the S&P 500’s underperformance compared to these other broad indices and while it is good to see small caps and tech lead, you also want to see the S&P 500 eventually confirm and make new highs as well. A failure could be signaling the start of a larger decline/consolidation.
