Stocks Rally Slightly On Wednesday

This week has been great for equities as they rallied Wednesday again. It was a much smaller rally than the prior two days as the S&P 500 was up 0.08%. The chart below is my basic technical analysis which shows that the market has been making lower highs. The S&P 500 is right at the trendline. If it can increase in the next few days and possibly beat the previous high, it will be bullish. Failing at this point would be a red flag. The Dow Jones was actually down 0.16% because IBM stock fell 7.5%. IBM has a share price of $148.79 making it the 9th highest price in the Dow out of 30 stocks. The Dow is price weighted so high priced stocks have a higher weighting.

Once again, the financials underperformed as they fell 0.37%. The XLF is only up 1.55% since the February low which is worse than the S&P 500 which is up 4.86%. Energy led the way as it increased 1.55% as oil was up 3.35% to $68.75 since stockpiles dropped. The higher oil gets, the higher inflation gets which could become a thorn in the side of the Fed. Personally, I’m bearish on oil because the economy is slowing and there is so much shale production that will come on line if oil gets above $70 and stays there.

Trading on Wednesday was an example of earnings holding up the market rather than causing it to rally. The industrials sector was up 1.02% on the back of great earnings from CSX. The stock was up 7.85% as the firm reported 78 cents of EPS which beat estimates by 12 cents. Revenue growth was 0.3%, reaching $2.88 billion which beat estimates by $50 million. The bad news for the overall economy is that this beat was driven by operational improvements as the operating ratio improved 950 basis points to 63.7% from 73.2%.

Great Earnings From American Express & Amazon Letter

It looks like stocks will head higher on Thursday because American Express beat estimates and Jeff Bezos released his shareholder letter for Amazon. American Express had $1.86 in EPS which beat estimates for $1.71. The firm also said EPS for the full year will be on the high end of the range from $6.90 to $7.30. Revenue of $9.72 billion beat estimates for $9.46 billion. The stock rallied 3.99% after hours on Wednesday. This is a great sign for the overall economy just like CSX’s report. This one is even better because revenue was great opposed to the executional improvements CSX had.