Closing Wrap-Up, May 14
May 14, 2008
Stocks rise, but fail to break resistance despite better than expected consumer prices data. The Dow ($INDU) gained 66.20 points to close the session at 12,898.38. The S&P 500 ($SPX) added 5.62 points, closing at 1,408.66. The NASDAQ ($COMPQ) tacked on 1.58 points to 2,496.70. Volume remained light despite option expiration Friday with 1.03 billion shares traded on the NYSE and 2.04 billion shares exchanged on the Naz. Market breadth was positive by an 18-to-13 and 15-to-14 margin on the Big Board and Naz respectively.
Stocks came off their intraday highs with the Dow running into resistance at its 200-day moving average. The consumer price index [CPI] was better than expected, lifting sentiment and providing the bulls with a reason to buy. Earnings news continued Wednesday with Freddie Mac (FRE) rallying following its report, but Applied Materials (AMAT) flat following its release.
The CPI came in a tenth below estimates overall and at the core. The headline figure rose 0.2 percent with the core rate up 0.1 percent. Food prices rose faster than at any point in the past 18 years. Ironically, airline prices fell, although they have since moved higher. In the past year, the headline figure is up 3.9 percent with the core rate up 2.3 percent. Both figures are only down a tenth from March’s figure.
Shares of FRE rose nearly nine percent after the mortgage finance company reported better than expected earnings. FRE did lose $151 million, or 66-cents a share, in the quarter, but estimates were for the company to lose $1.57 a share. The company announced it would raise $5.5 billion in capital through the sale of common and preferred stock. FRE shares close above $27, but remain well below their 52-week high at $68.12.
Shares of AMAT were basically flat Wednesday after the chip equipment maker reported sub-par results for its fiscal second quarter. Not only did AMAT report a drop in sales, new orders and earnings, but the company also provided a disappointing outlook. The feeling is that chip orders will continue to soften this quarter, yet AMAT shares were able to avoid losses. Overall, the Philly Semiconductor Index ($SOX) added 1.23 percent to 411.30.
The Dow hit an intraday high Wednesday at 12,993.15, which happens to coincide with the indices 200-day moving average. Something will have to give eventually for the Dow with the 50-day and 200-day moving average providing a trading range, but narrowing each day.
Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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