The Market's Dynamics Remain Strong
04/13/2009 6:53 am EST
Mark Leibovit, chief market strategist for VRTrader.com, says last week’s action shows a strong market despite the economy’s continuing woes.
Another day, another well-timed news event. [Last Thursday,] Wells Fargo’s earnings were the catalyst to allow the bulls to run once again. For the session, the Dow Jones Industrial Average was up 246.27 at 8083.38, the Standard & Poor’s 500 index [rose] 31.40 at 856.56, and the Nasdaq Composite index [increased] 61.88 at 1652.54. Volume came in at its highest level in a week on both exchanges despite the pre-holiday conditions. Breadth was very strong.
Financials were boosted by Wells’ better-than-expected earnings, as it smashed estimates and said it expects record first-quarter earnings of $3 billion. "It's premature to conclude the economy has turned," said Howard Atkins, Wells Fargo's chief financial officer. "All I can tell you is we're seeing a lot of business." The market obviously liked what it saw. Financial Select Sector SPDR (NYSEArca: XLF) closed 15.54% higher on the session.
Small caps continued their outperformance as the Russell 2000 was up 5.9%. That is a very good sign for the bulls as traders' appetite for risk is moving higher. The world is awash in printed money due to the efforts of governments around the world. While world equity markets are partying now, will there be a price to be paid later? Time will tell.
In economic news, initial jobless claims for the week ending April 4 totaled 654,000, which is down 20,000 from the week before, and slightly below the 660,000 initial claims that were expected. Continuing claims, meanwhile, totaled 5.84 million, which marks a new record high.
Some economic reports show the economy bottoming out, though not yet improving, while others show continued weakening. Some companies, such as the banks, are talking about improving earnings after a long slump, but others are seeing continued declines in revenue and earnings.
Crude oil futures closed pit trading with oil priced 5.2% higher at $51.97 per barrel. The US Energy Information Administration said on Wednesday stockpiles increased 1.7 million barrels in the week ending April 3rd. Traders in the crude oil pits were obviously shrugging off the high inventory numbers and looking toward economic recovery.
The dollar shrugged off the worsening employment picture in the US to trade with modest gains. The US Dollar Index closed .061 higher at 85.847. In the last three weeks, the US Dollar Index has only had one big up day and one big down day. Most days, the index barely moves, though it does seem to have a slight up trend. Look for a test of resistance at March 30th's high of 86.125.
We understand that this market is very strong right now. We continue to believe, however, that this is no ordinary, garden-variety recession. Regardless of our opinion, this market wants to move higher and we are moving with it.