Buy the rumor – Sell the news?
Index & Sector performance 10/16/13
The Market:
Another strong day in the market sent the S&P 500 index over 23 points higher after a brief consolidation day yesterday. What started as a small gap quickly ran in the first hour of trading eventually topping at 11:15 am EST. The market then consolidated until 2:30 pm EST when it bottom and started a rally back toward the highs of the day. Amidst a light economic data week, the news of Washington and the pending debt deal have continued to drive attention and trader reaction.
Ahead of tomorrow’s Unemployment data (357K Consensus) which as a reminder post a much larger than expected number last week which was quickly blamed on the government shutdown and a computer system change in California we had Housing index numbers which came in slightly soft as well as Beige Book and some Fed Speak.
While not hard to find a stock or sector up for the day, today’s trading was lead, on the WSC Scoreboard, by the Financials (XLF) followed by HealthCare (XLV). The XLF was lead by JP Morgan (JPM), Citigroup (C) and American Tower (AMT) which closed up 3.23%, 4.05% and 3.20% respectively. All 3 stocks also look like names that could continue on and be strong trading candidates.
Story Stocks:
Bank of America (BAC) along with Pepsi (PEP) helped get things started today with solid earnings reports before the open. BAC posted a 20c quarter vs 18c expectation on slightly light revenue ($21.74B vs $22.03B). Like BAC, PEP beat on the bottom line ($1.24 vs $1.17) but was below expectations for revenue ($16.1B vs $16.9B). BAC and PEP closed up 2.25% and 2.07% respectively.
Advance Auto Parts (AAP) made news when they announced an agreement to purchase privately held General Parts International for over $2B. You might not recognize the name General Parts but you may have been in one of the 2,600 Carquest locations of which 1200 are company owned and 1400 independent. This new entity will rival the current market leader, Autozone (AZO), in annual sales with over $9B. AAP gained over 16% on the news.
Also moving on earnings today was Abbott Laboratories (ABT) which gained 6.50% off a positive report and Stanley Black & Decker (SWK) which lost 14.26% after lowering 2013 fiscal guidance.
The following noteworthy companies are scheduled to report earnings before tomorrow’s open: PM, VZ, GS, UNH, UNP, DHR, BAX, PPG, BBT, NUE, BX, FITB, DGX, HBAN, SNA, BTU, PENN, SON
Analyst Comments:
Upgrades 10/16/13
Downgrades 10/16/13
Initiations 10/16/13
Price Target Changes 10/16/13
The Game Plan:
Amidst all the uncertainty and will they won’t they regarding Washington, the market was able to use the Bradley turn date to find a bottom and has now moved strongly higher with 5 of the last 6 days in the green. The once precarious looking MACD has now regained the zero line and looks to be trying to recycle and retest that long trend line which acted as perfect resistance roughly a month ago. The 10/8 – 10/9 is not key to further upside and ideally for the bulls $1680 should hold as support.
Last thought for the night. With such a strong rally on the signs a debt deal might be in place, you should wonder if this is setting up for a buy the rumor sell the news event.
