Financial Sector Rally

The financial sector rally accounted for the majority of yesterday’s bullish price action in the Dow and SPY.  XLF the popular financial ETF rose 1.60% yesterday finally breaking a 6-month sector downtrend.  The tech sector took a little break yesterday and the QQQ chopped sideways on light volume.  Perhaps the earnings from MSFT this afternoon will provide the tech sector a bit of inspiration.

The Futures are indicating some downward pressure at the open but as long as the current price supports hold the Bulls should maintain control.  After such a strong two week rally a little rest or even a small pullback would be healthy for the market assuming the bulls defend price supports.  Keep in mind with more than 100 companies reporting today anything is possible.  Set aside your bias and stay focused on price action.

On the Calendar

Thursday’s Economic Calendar has only two potential market-moving reports both of which come out at 8:30 AM Eastern.  Consensus expects Weekly Claims to come in slightly higher at 220,000 vs. 214,000 last week.  Then the Philly Fed Business Outlook is looking for an increase in July to 22.0 vs. the 19.9 June reading according to forecasters.  After that, we have a Fed Speaker @ 9:45 AM, Leading Indicators @ 10:00 AM, Natural Gas Report @ 10:30 AM, 6-bond related events between 11:00 AM & 1:00 PM, The Fred Balance Sheet & Money Supply @ 4:30 PM to close the calendar day.

On the Earnings Calendar, we have 103 companies reporting today.  Please make it a habit of checking earnings reports on the companies you own and those you are considering for purchase.  Next week earnings season ramps up with over 800 companies expected to report results.

Action Plan

Overnight Asian and Europen were mostly lower putting some downward pressure on the Futures markets.  Also after the close yesterday, EBAY and AXP were among several earnings reports that beat on the top line but failed to hit revenue projections sending the stocks lower in aftermarket trading.  Let’s hope this doesn’t become a trend this quarter!  CSCO was one of the bright spots beating on the top and bottom line, but the stock only enjoyed modest gains.  AA also topped estimates but guided lower siting higher energy prices and tariff impacts raising their cost of production.

Market gains in the last couple days have come mostly from the financial sector while other areas have been slow and downright choppy.  If you’re feeling a bit frustrated, you’re not alone!  Currently, the Dow futures are pointing to a lower open and considering we have been up for almost 2-weeks that’s not a big surprise.  Perhaps with a large number of earnings this morning the bulls will at least find enough inspiration to hold price support levels.  MSFT reports after the bell today and its results could set the tone for the end of the market week.

Trade Wisely,

Doug