Standard & Poor's (Earnings, That Is)
E-mini S&P – Stock futures have given back a third of yesterday’s gains on weak earnings data from blue chips Pfizer, Merrill Lynch and Nokia. Nokia’s earnings fell short of street estimates for the current quarter, and the mobile phone bellwether lowered its guidance for the latter part of the year. Merrill posted a large quarterly loss of $1.96 billion, which was not entirely unexpected given the current banking climate. The Wall Street giant plans to write off an additional $6.5 billion of bad debt and reported a 40 percent drop in investment banking fees. On a positive note, IBM posted a 26 percent rise in profits and increased its earnings outlook for the remainder of the year. Recession fears still dominate trading and most of the recent buying has come on breaks, as investors try to scoop up stocks at bargain prices. The near-record price of Crude Oil and sharp increase in food prices may cause the Fed to re-think its current rate-cutting strategy. Today’s Initial Claims report showed an increase in jobless claims, but fell short of street estimates. The prior week’s claims were revised down by 12,000, which is somewhat encouraging.
June futures continue to trade in a sideways congestion pattern on the weekly chart and are now trading at the middle-to-upper end of the range. Weekly momentum studies have been falling – despite futures being higher for the week – and are currently showing bearish divergence from the RSI. This suggests that near-term highs around the 1390 mark may offer stout resistance. The daily chart shows that the rally may not have run out of steam yet. Stochastic and RSI indicators are neutral for daily and weekly timeframes.
Rob Kurzatkowski, Commodity Analyst
