Market Insider/Wednesday Look Ahead
The drip, drip of rising oil prices could start to wear on stocks, but traders point out that the market has been fairly resilient and is still raring to go higher.
Tuesday's after-the-bell earnings news could be a positive for stocks going into Wednesday's open. Cisco and Disney were both out with better-than-expected numbers though Cisco stock retraced some of its after-hour gains.
Weekly oil inventory data is released at 10:30 a.m. and investors will be watching that data carefully after another record close for crude Tuesday. Oil finished at $121.84 per barrel, a gain of $1.87 or 1.6 percent. Goldman Sachs Tuesday updated its "super spike" forecast, saying oil could go to $150 to $200 in the next six to 24 months.
What to Watch Wednesday
In economic news, productivity and costs are released at 8:30 a.m.. Pending homes sales are due at 10 a.m. and March consumer credit is released at 3 p.m.
Companies reporting earnings Wednesday include Allergan, Marsh McLennan and Transocean. News Corp reports after the bell. Shareholder meetings are being held by Pepsi, General Dynamics, and Amgen.
You can bet investors will focus on the outcome of the Indiana and North Carolina presidential primaries. Bank of America's chief market strategist Joseph Quinlan in a note Tuesday reminds us that the S&P typically has posted 14.2 percent average returns in the last year of a presidential term. But, he points out with the credit crunch this year, the market has been a big "dud" and it will be tough for history to repeat itself.
That's a word we’ve been hearing lately when it comes to the stock market. Even with a major move up in oil, stocks shook off fairly steep losses to close higher Tuesday. The broader market followed Fannie Mae, which reported disappointing results before the bell, saying it needed to raise $6 billion. Yet the stock, and the market, rose in response to a move by federal regulators to loosen capital requirements and allow Fannie to play an even bigger role in the mortgage market. The Dow finished up 51 at 13,020. The Nasdaq climbed 19 to 2483.
The S&P 500 rose 10 to 1418 after briefly crossing above 1420. Technicians have been eyeing the 1420-1430 range on the S&P, and it is expected to be a point of transition for the market.
Technical analyst Andrew Burkly of Brown Brothers says this is a critical juncture for the stock market, but he feels pretty good about it. "We're still pretty bullish. I do think we're going to take out 1430 on the upside," he said in a phone interview. Burkly, in a note this week, said that he was watching for any sign of fatigue around the underside of the falling 200-day moving average, which is around 1430.
"Things look pretty good to us. I'm not seeing any signs of major internal weakness," Burkly said. "I'd like to see breadth and volume a little bit stronger. But the pull backs we're getting aren't gathering any kind of momentum."
Burkly says it's possible the market could trade sideways for a few weeks once it does cross 1430. "What we found is that quite often historically, you'll come out of the range and sit on top of the range. It's not uncommon for three to six weeks to go by and then it will eventually move higher. There's generally this kind of consolidation phase. The sellers can't really come in and push things down."
Timing may also be an important factor, as the situation in the economy and credit markets shake out. Burkly also said there is still a fairly negative view of the market, and if that changes, there is about $3.5 trillion in money markets that could start to move into stocks. "It's been five or six years since we saw that level," he said.
As he sees it, it is more likely the S&P will make a new high rather than a new low this year if there are no new unforeseen negatives.
Bullish, For Now
Goldman Sachs analysts today issued a note on stocks we found quite interesting. Goldman's analysts, including strategist David Kostin, have produced plenty of research in the past couple of months about playing defense. But today, they were fairly bullish on stocks in the near term and said they are shifting sector weightings to include more stocks that perform well in a recovery.
In the note, the Goldman analysts say the market will trade higher before it trades lower based on the consensus view that the economy will have a V-shaped recovery. Yet, Goldman analysts disagree with this view and say the market will run up but then be disappointed. They see a W-shaped recovery and believe the S&P will trade higher over the next several months before returning to current levels.
In fact, the analysts acknowledge in the report that they kept their "defensive tilt" for too long because they believed there was more risk to the market from negative earnings guidance, which did not materialize.
The analysts said they now expect a "false dawn" as the impact of the stimulus and flow of money creates optimism. They point out that negative news on the second quarter will not be reported for at least five weeks, and earnings are not reported for another couple months. Signs that 2009 will be weak will not be visible until September.
They also said they are overweighting consumer staples, consumer discretionary and energy and underweighting health care, telecom , utilities and industrials.
Around the World
CNBC's Carl Quintanilla reports from Israel Wednesday as the country turns 60. He is reporting on Israeli companies and technology and investing opportunities.
In Russia, Dmitry Medvedev official takes over as president from Vladimir Putin, who will become Prime Minister.
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