We’re seeing the broader equity averages continue to push higher in resilient fashion as investors continue to digest a heavy round of mixed corporate earnings releases, data showing a sharp drop in weekly jobless claims, and surprisingly better-than-expected British growth data.
The S&P 500 is breaking out a bit this morning (shrugging off any buyer exhaustion) and appears set on re-testing the all-time highs/technical resistance of 1,593. As of 10:45AM ET, the S&P 500 is at 1,589, which is 0.7% higher for the day. Please note that the index has nearly recouped the entire -3% pullback from 4/11 to 4/18, in what is becoming a very normal V-shaped bounce in the current QE-fueled recovery.
Main Factors Driving Early Trade:
– U.S. Jobless Claims Fall to Lowest Level In Six Weeks – The number of people who applied last week for new unemployment benefits fell near a five-year low, though the decline probably reflected temporary distortions that often occur after the Easter holiday and not a marked improved in the U.S. labor market. Initial jobless claims dropped by 16,000 to a seasonally adjusted 339,000 in the week ended April 20. That’s the second lowest reading in 2013 and approached levels last seen in January 2008.
– Heavy Round of Earnings In Focus – 3M is the top decliner in the Dow, off 3.5% after the industrial conglomerate lowered its full-year earnings estimate. Exxon Mobil is also weak, with its shares down 1.4% after the oil major reported that its first-quarter earnings rose 0.5%, but revenue fell short of Wall Street estimates. Dow Chemical shares up nearly 4% after the company posted a first-quarter profit rise. Shares of Zynga off 7.8% after the social-games company swung to a profit but offered a weak forecast. Cliffs Natural soared 14% and UPS climbed 1.3% on better than expected results. Akamai Technologies rose 19% as revenue and profit beat estimates. In deal news, Verizon is working on a $100 billion cash and stock bid to buy out the remaining 45% stake of Vodafone that it doesn’t already own.
– Better-Than-Expected British Growth Data – After contracting by 0.3% in the fourth quarter of 2012, the U.K. economy expanded 0.3% in the first quarter, avoiding the feared triple-dip recession. Government spending, however, played a sizeable role. In the fourth quarter, government spending fell 0.2%, whereas in the first quarter, it rose 0.1%.
– Dovish Central Bank Headlines – Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts. According to a new survey of 60 central bankers conducted by Central Banking Publications and RBS, 23% said they own stocks or plan to buy them. Major central bank buyers of equities include the Bank of Japan, the Bank of Israel, the Swiss National Bank, and the Czech National Bank. Additionally, while the consensus is still for the Fed “tapering” down its programs sometime next winter, the fact that the economy remains in stall speed of 1-2%, there is now talk about actually expanding QE. Debate among Fed policy makers is beginning to shift away from the timing of a reduction in bond buying to the need to extend record stimulus as inflation cools and 11.7 million Americans remain jobless.
– Commodities Strengthening – Oil rose to trade around $102 a barrel and the spread between the front-month Brent and U.S. crude oil futures contracts narrowed to less than $10 for the first time since June 2012. Gold rose almost 2%, supported by demand for the physical precious metal.