There is just too much to write. So I will split this post into two – Bernanke and Non-Bernanke (vis-a-vis the earnings).
After being down 82 points in the early going the Dow reversed course and closed 78 points higher on Tuesday. Wow! Then the Nasdaq surged 1.1% as the technology sector led the market today.
The reversal was due to Fed Bernanke’s testimony this morning that the Fed is willing to do what it takes if the economy and labor markets do not improve. He expects historically low rates to remain in place at least until the end of 2014 and most importantly he convinced the participants that the policymakers at the central bank seem to be preparing for additional moves to spur the economy in the weeks or months ahead.
This low interest rate environment should help stem any serious correction in the market averages.
So, where does yesterday’s trading action leave us now? First, I don’t think that this is a short squeeze anymore. Second, yesterday qualified as a decent follow through day from Friday’s key reversal which is a positive development.
Moreover, the basing action in some stocks and the sector rotation is almost clear now. One last thing to notice is that the junta seems to have realized that the tech and oil & gas stocks have been beaten to death. See below –
In fact we see rise or less “severe” damage to stocks even after the poor guidance.
- To exemplify, look at the the turn around in STX after it pre-announced a revenue miss by 0.5 Billion dollars (seriously!) or even QCOM which reported fiscal Q3 revenue and earnings per share a little light of consensus, and a Q4 view below analysts’ estimates.
- And of course an earnings beat is amply getting rewarded. e.g. MLNX – up 43% after hours, SCSS – up 17% after hours and SWKS – up 10% after hours.
So step in but be cautious.
Food for thought –