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Daily Market Update – April 23, 2015 (8:15 AM)
The earnings keep pouring in this morning and the reactions are mixed, so far. With the general story continuing, that is that top line revenue is tending to be lower than expected, while bottom line profits are trending higher, for the most part those reports are being taken in stride. Maybe even better than simply “taking it in stride,” as the S&P 500 is about 1.2% higher for the week and now is within 0.5% of its all time closing high. It’s amazing what can happen as you prepare yourself for the possibility of bad news. If you act adult-like, and the disappointments do come along as expected, there seems to be less of a reason to panic or over-react. That has definitely been the case as this earnings season has gotten underway and is now in full swing. The expectations were low due to currency headwinds and the relief has been palpable as the numbers are being released. Even decreasing forward guidance, which is usually a kiss of death, hasn’t been keeping the market from moving forward. When you are led to believe that the market values growth above everything else, it is a rare sight to see it moving higher even when prospects for growth are being dashed. But as long as that strategy of under-promising or having lowered expectations seems to be working, then imagine what the next earnings season could bring if results are better than we’ve been anticipating. Interestingly, Caterpillar, which reported this morning and is up sharply in the pre-open trading said nothing about the singular factor that has been depressing top line revenues for just about everyone else. With just about everyone else pointing a finger at currency exchange Caterpillar hasn’t said much about that and shares were soaring, perhaps because the market values immunity from natural laws. That immunity seems odd, considering how much Caterpillar has a stake in all parts of the globe. Another form of immunity came as Dow Chemical reported its earnings this morning. Its CEO, Andrew Liveris, again reiterated that his company is essentially ambivalent about the price of oil. He said that a few months ago as Dow Chemical was getting caught up with the slide seen in energy prices, but based on its price actions, no one seemed to believe him. It has been a case of “that’s my story and I sticking to it,” but lately it appears as if investors have come around to his logic, which presumably is based on more than just logic. With 2 days left in this weekly cycle, there’s some opportunity remaining for some rollovers and perhaps even some assignments. However, this morning’s early weakness in the futures, although improving a bit as earnings have been coming in, makes it a little more tenuous. Without some continued strength, especially a strong pop higher, there’s not too much likelihood of being able to sell new calls on currently uncovered positions, so while I would like to see assignments, I may prefer now to have the opportunity to rollover some positions instead, so as to |
