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We missed an interesting session yesterday with our quarterly survey so it is worth mentioning it today. The market was very volatile yesterday but sometimes that can cause a shakeout of sorts when it comes at the end of a correction. Also the NASDAQ hit a key moving average – the 200 day – which if nothing else is usually a place for momentum to reverse in the near term. Was that the end of the correction? Of course we never know until after the fact but creating a new low and then surging off it can sometimes signal a key reversal. As for today, the Federal Reserve continues to try to massage the market’s nerves and Janet Yellen helped lift spirits, pushing the S&P500 up 1.05% and the NASDAQ 1.29%.
In her second public speech since taking the Fed’s helm, Yellen was careful not to predict when interest rates would rise from near zero. Instead, she stressed the decision would hinge on healing in the labor market and on how briskly inflation rises toward the Fed’s 2 percent goal. Yellen reiterated her intention to support the recovery even as the labor market improves, with the 6.7 percent unemployment rate in March still a percentage point higher than the central bank’s projection of full employment.
Outside of Yellen there was some supportive economic data:
Economic data had U.S. manufacturing output rising for a second straight month in March, with factory production up 0.5 percent last month and overall industrial production climbing 0.7 percent, beating expectations. The Fed’s Beige Book, a report of anecdotal information on business activity, showed that activity picked up in most regions in recent weeks.
Looking at the longer term indexes the NASDAQ chart shows you exactly why we bounced where we bounced yesterday. It wasn’t a random event like those who don’t follow technicals might think; instead it was a perfect kiss off the 200 day moving average. While it is too soon to call any sort of bottom for this index, clearing the downtrending line in blue would help.
The S&P 500 continues to be in far better shape throughout this correction.
After hours we had reports tonight from both IBM (IBM) and Google (GOOG) – both are being hit in after hours as we you see below in the charts from thinkorswim by TD Ameritrade. Hence there might be some pressure tomorrow at the open, at least in tech stocks. That said buyers have been coming in for Google so it is well off its lows as you can see in the chart.
Google delivered quarterly earnings and revenue that fell short of analysts’ expectations on Wednesday, as ad pricing continued to weaken. The company posted first-quarter earnings excluding items of $6.27 per share, up from $6 a share in the year-earlier period. Revenue increased by 19 percent to $15.42 billion from $12.95 billion a year ago. Analysts had expected the company to report earnings excluding items of $6.40 a share on $15.52 billion in revenue, according to a consensus estimate from Thomson Reuters. The number of “paid clicks” climbed by 26 percent year-on-year in the first quarter, while the average “cost per click” generated from the ads dropped 9 percent from a year ago.
IBM Corp reported its lowest quarterly revenue in five years as the company struggles with falling demand for its storage and server products. Total revenue fell 4 percent to $22.5 billion in the first quarter, below analysts’ average estimate of $22.91 billion. Revenue from the hardware business, which includes servers and systems storage, plunged 23 percent to $2.4 billion.
Yahoo (YHOO) surged after the company gave a tepid revenue outlook; however revenue growth accelerated in the last quarter of 2013 for Alibaba, in which Yahoo holds a 24 percent stake.
Intel (INTC) shares briefly hit their highest since June 2012 a day after the chipmaker posted a quarterly net profit that exceeded Wall Street’s estimates. This was a very strong chart going into earnings – almost with no dip during the correction!
Just a heads up – tomorrow along with a raft of earning reports comes the widely anticipated IPO of Weibo, which is the “Twitter of China”.