Daily Market Update – April 13, 2015 (Close)
While there are some economic reports of interest this week they’re not likely to be anywhere near as important as the real beginning of earnings season this week.
It may have started with Alcoa last week, but tomorrow begins the series of reports from the major money center banks.
While they can do well and not bring the rest of the market higher with it, it’s not to common for those banks to report disappointing earnings and then to see the rest of the market thrive. However, that was the case in the final quarter of 2014, when the relatively disappointing earnings reports from the banks didn’t drag markets lower.
So it could happen.
This time around there aren’t really great expectations for the banks and instead most attention is going to be focused on those companies that may have significant currency exposure, such as Intel, which also reports this week.
We’ve been talking and fretting for so long about currency impact that you would have to think that it would have to be much worse than expected for the actual reports to bring stocks down very much. You might also think that companies with lots of cash overseas and earning lots of money overseas are involved in fairly sophisticated currency hedging that would finally start to pay off.
However, coming off a relatively strong 2 weeks to start April after a really disappointing March, there’s room to give up some of those recent gains. On the other hand, though, April is just an historically strong month for markets and our lowered expectations for earnings may be just the environment necessary for the next phase higher.
Each of those is reasonable and we’ll find out soon enough whether there is enough contained in the upcoming earnings reports to push markets higher, as we’re running out of other reasons to see growth.
At this point it looks as if we’re going back to good old fundamentals, which normally would be a good thing, unless some one comes up with the realization that current levels are just artificially so high and to a degree are based on engineering of EPS data through years of buy backs that have probably now seen their peak.
Just look at the performance of GE today, just a day after its 10% gain following announcement of a $50 Billion buyback that will be funded from selling its non-industrial pieces. Never mind that those pieces were now making money.
That GE buyback may truly have been the peak of the corporate strategy that has been soaking up shares and helping to create an illusion of greater comparative earnings.
GE actually reports earnings this week, too. That could be interesting.
With only a single assignment last week I’m not expecting to be very actively looking for new positions this week, just as last week was restrained.
With a number of positions set to expire this Friday as the monthly cycle comes to its end, I’d be very happy to have a repeat of last week. Being able to get rollovers done and execute the sale of some calls on existed uncovered positions would satisfy my need to generate income for the week.
However, as much as I was happy with last week, this week I would like to see some more emphasis on the assignment side of the equation.
At the moment a number of positions are candidates for assignment but it’s not a done deal until the final closing bell rings on Friday and even then it’s not really a done deal until as much as another 90 minutes passes.
So I won’t be making too many plans with all of that money from assignments that still may not ever become reality until they do.
However, with the likelihood of at least some and with the additional likelihood of at least being able to get some rollovers accomplished, any new positions may equally look at expirations this Friday or in some future weeks.
With volatility getting lower and lower and bringing premiums down, as well, there’s not too much attraction for looking at the extended weekly options unless earnings come into play and help to boost up some premiums.
The market appeared to be getting ready to open the week on a flat note, so the early direction could have then gone anywhere, but it ended up getting progressively weaker as the day wore on, in the complete absence of news.
For whatever there was today the week won’t begin for real until tomorrow morning when JP Morgan and Wells Fargo get it all going.