Midday Action: July 23
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July 23, 2008
Cheer over TS Dolly going limp and more government-mandated financial flexing are countering mixed earnings and some decisive high-profile schnitzeling. As of 10:50 ET, the “SPYder” (SPY) and “Cubes” (QQQQ) are up 1.05% to 2.03% and closing in on further confirmation that a bottom is finally in.
Market bulls have continued to improve upon Tuesday’s upside reversal. One key story that remains a support is related to easing fears of Tropical Storm Dolly causing production problems in the Gulf. Intraday and following a mixed inventories report of increased gas stockpiles versus a larger slip in crude supplies, the US Oil Fund (USO) is off 1.25 near 102 and helping boost further; sentiment dedicated to proving the bottom, way down below, is indeed confirmed.
Aiding and abetting those still digging for financial treasures, the House of Reps has set in motion an agreement to vote on a bill regarding assistance for GSE’s Fannie (FNM) and Freddie (FRE). The move has inspired the financials (XLF) to once again, spearhead the broader market’s gains as shorts receive another government-induced blow and other investor types jump in to catch the well-televised bottom.
Elsewhere, investors donning their new and improved eyewear have managed to cheer on and accentuate positive results despite a very mixed crop of earnings reports. Living up to the initial billing, “BTE” earnings that continue to find investor support include Intuitive Surgical (ISRG), Whirlpool (WHR), AT&T (T), General Dynamics (GD), WellPoint (WLP) and Pfizer (PFE).
Not as nice after spearheading the out-the-gate cheer is investor reaction in fast food goliath and Dow component McDonald (MCD). The company posted an 18 cent profit beat on earnings of 1.04 per share and 42% above last year’s results. Sales also bested expectations and tacked on growth of 4% over the year-ago period. Intraday though and after jumping a couple of percent, shares of MCD are giving some bulls stomach trouble with shares falling victim to the notorious “Sell the News” reaction and off .94 at 59.18.
For the bears and bulls in need of some Tums from the get-go, Wednesday has offered more than a few high-profile misses and decisive investor backlash. Shares of Costco (COST), the country’s largest wholesaler, have tumbled by more than 10% near $64.65 after guiding lower for its fourth quarter and full-year outlook due to higher energy costs and a LIFO accounting charge. Similarly, NASDAQ component and air delivery specialist C.H. Robinson (CHRW) has been grounded by nearly 15% at $50 after missing views. And Boeing (BA) has had its wings clipped by 3.25% following its revenue miss and management reaffirming its FY08 EPS range of 5.70 – 5.85, but one which falls below consensus estimates of 5.86.
And finally, further confirmation that a bottom is in place for intermediate growth strategists has backed off as traders move through the lunchtime hour. Session highs and volume expansion had been on pace to confirm a follow-through day for the broader market. However and regardless of whether that technical event is established today, the “VIX Stretch” indicator monitored by this market strategist is signaling caution to any would be bulls in the short-term. With today’s lows in the VIX stretched in excess of 15% below the 10-Day MA, too much enthusiasm a week removed from the market lows is the current and more pressing reality.
Chris Tyler
Staff Writer & Options Strategist
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