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Market Action

S&P 500 Index Today

I like the action in the market. Take a look at the chart of today’s movement of the S&P 500 Index. It looks very constructive to me from the standpoint that in spite of some bad news sending the market down at the open, the buyers come in and bring it back up. Yes, we were down 1/2% today, but the fact that there are buyers out there that are committing their money during a sell-off looks like a positive thing.

And, it didn’t happen just today. Take a look at the action in yesterday’s S&P 500 Index:

S&P 500 Index Yesterday

You can see the market was treading water waiting for the minutes of the most recent Federal Reserve Meeting to be released. When they were and no news of imminent additional monetary stimulus was included, the market sold off. But the buyers stepped in and brought it back to breakeven on the day.

As long as there are buyers out there, I am feeling fairly constructive. Earnings have been mixed (trying to be charitable) but it is just the beginning of earnings season.

Cummins Engine came out and stated that their earnings will be flat the rest of the year – no losses, just that they aren’t going to make any more money that they did in the second half of last year. Look what happened to their stock price:

Cummins Engine

Their stock price is down 13.5% since they made this announcement. I think that this will be one of those earnings seasons where bad news is punished in a big way, just like we see happened to Cummins, but good news will not be rewarded in the same ratio. It happens. Tomorrow will be the earnings report from JP Morgan and in it we will find out exactly how large of a loss they are booking on that failed trade out of their London office – $2Billion? $6Billion? $9Billion? Everyone is eager to know the extent of it. To me, it looks like $6Billion may already be built into the stock price, but that’s just a guess.

Earnings season is always a roller coaster!


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Mark