The earnings parade starts today with Alcoa! The data should give some insight into the materials sector which has been doing well of late, and the base metals which have stumbled. Basic Materials broke to a new high last week and has held the gains. This is one of the leaders currently for the broad indexes. Likewise, base metals rose off the lows in November and gained upside momentum before stalling in mid-December. Good news from Alcoa could assist in keeping the upside alive in both sectors. Everyone is hoping the earnings announcements won’t be a series of blame games on Sandy, the Fiscal Cliff , the Great Winter Storm, or some other event from the fourth quarter.
Billions of more dollars in settlements from the banking sector. I assume this makes the banks better and helps them build up their reserves the way Timmy G. wanted? This is insane and there is still plenty of litigation to be determined against the banks. Is there any doubt why the sector can’t make any headway? Do we really wander why lending hasn’t been very strong the last few years? I know, I promised I would not get sidetracked on rants about things we can’t change, but this has to stop at some point. This is getting worse than the tobacco trials. Despite the news the sector is still expected to show a positive quarter for earnings which start on Friday with Wells Fargo. KBE is holding the move above $24.60 to post a new high.
Healthcare is another sector pushing to break through the previous highs. XLV, SPDR Healthcare ETF closed at $41.03 and needs to move above $41.32 to eclipse the October high. Breaking the sector down shows Pharmaceuticals (XPH) already breaking above resistance and gaining momentum of late that will help the broad sector on the upside. The healthcare providers (IHF) have been struggling to find some leadership as a sub-sector, but a move above the $69.50 level should help. The medical devices (IHI) managed a move above $69.25 on Monday to clear the first resistance hurdle. The biotech stocks (IBB) cleared $141.63 resistance to renew the uptrend. The sector overall remains in good shape technically and fundamentally looking forward.
Is Facebook finally being taken seriously? The stock has jumped from $18.80 in November to $29.42 on the close Monday. Analyst like the stock, and investors seem to be willing to buy in as well. Every since the company announced or explained their mobile business model the stock has seen growing interest. They are making all the interface apps, software and VOIP work easily and seamlessly That is all good news for investors. The revenue monetized through being a more mobile device centered company is raising revenue estimates which is getting attention. However, any stock that run up nearly 60% in two months has to careful when reality meets expectations if they aren’t in sync Protect your gains or hedging your positions may be prudent.
Our Friend Apple is testing lower again. The close at $523 on Monday came after the test lower at $515 intraday. This is near the level we discussed for the stock to hold support and bounce back towards the $550 level yet again as we creep towards earnings. Which by the way will be a make or break point for the stock short term. After two disappointing quarters, a third could be lethal.
After hours YUM, Yum Brands warned China sales fell more than expected. The decline of 6% was well ahead of the 4% expected. A government announcement about the quality of poultry hurt sales in the last two weeks of December. The stocks is down more than 5% after-hours. There earnings report will be February 4th. This is a stock to watch relative to the impact as the sector has been attempting to break from a low trading range.
There is plenty of data, and plenty to digest as the markets continue to look for leadership and confidence. Each time it finds some momentum it is followed by news that takes the wind out of the sails. Last week took the indexes to their September/October highs, and some higher. The market is pricing in positive data going forward, if there are any disappointments along the way, it will have a negative influence on stocks. We have to remain patient and take what the market gives one day at a time, keeping our eye on the exit.