MARKET WRAP – STOCKS SOAR ON EARNINGS NEWS

Stocks spiked 1.1% on “better than expected” earnings news after Intel and JP Morgan outperformed expectations.  We’re not sure why this was “news”, but it’s clear from the market action that most investors were shocked by the data.  On January 8th we said:

“For 2010 Q1 they are calling for just 1.9% sequential growth.  In a nutshell, they expect earnings to be in-line with the last few quarters (which I believe is utterly naive and lacking in any real analysis worthy of paid employment).   These estimates are almost certainly low.”

Clearly, we’re the only readers of our own work as this data was not even remotely surprising to us (not to mention our warning yesterday of the likelihood of very good news today).  Despite what appeared like “priced in” news, this market remains unflappable.  The easy trading trends remain well intact.  Bad news is good news and good news is great news.  Monday’s are always up days, the 10:30 AM bottom is always bought into and days ending in “Y” end on the plus side. This market has been a trader’s dream come true.

Like most days during this incredible run-up the volume was light today, but breadth was very strong at 3:1.  Stocks have now rallied 8.5% in just the first 3.5 months of the year.  At this 29% per year trajectory the S&P 500 will finish the year just shy of an all-time high.  This trend is certainly your friend.

From Daily Futures:

U.S. Economy
The U.S. Labor Department said that the consumer price index was up .1% in March and up 2.3% from a year ago. The June U.S. T-bonds fell 22/32nds to 115.30/32nds.

This afternoon’s Beige Book from the Federal Reserve said that “overall economic activity increased somewhat since the last report across all Federal Reserve Districts except St. LouisÉ” They also admitted that “commercial real estate activity was slow across the nation.”

The U.S. Commerce Department said that retail sales were up 1.6% in March and up 7.6% from a year ago, much stronger than expected. The June 2011 eurodollars ended down .01 at 98.485.

The Commerce Department also said that business sales were up .3% in February while inventories were up .5%, a little more than expected.

The Mortgage Bankers Association said that its index of mortgage applications was down 9.6% last week to its lowest level since the first week of 2010. The average rate for a 30-year fixed mortgage fell from 5.31% to 5.17% last week. July lumber closed up $4.30 at a new contract high of $309.00 anyway.

Grains and Cotton
May corn gained 5.5 cents to $3.58, blamed on short-covering and unconfirmed talk that China may soon need to buy corn.

Livestock
Yesterday’s gain in hog prices was partly attributed to unconfirmed talk that Russia may be close to ending its ban on U.S. poultry. Today, June hogs were down .52 at 84.95.

Brazil’s complaints about U.S. cotton subsidies may lead to an acceptance of Brazilian beef into the U.S. in 2011, some news outlets are reporting (see article). June cattle fell .52 to 92.95.

Sugar
May sugar closed up .55 at 17.53, the fourth consecutive day higher, helped by bargain-hunting and a weaker U.S. dollar.

Energies
In today’s Monthly Oil Market Report, OPEC reduced its estimate of 2010 world oil demand from 85.24 to 85.21 million barrels per day. They also acknowledged that the world economy continues to improve and estimated world growth at 3.5% for this year. June crude oil finished up $1.62 at $86.73.

The U.S. Department of Energy (DOE) said that crude oil supplies were down 2.2 million barrels last week to 354.0 million barrels. Supplies of gasoline were down 1.1 million barrels while heating oil supplies were up 500,000 barrels.

The DOE also said that refinery use increased from 84.5% to 85.6% of capacity last week. Over the past four weeks, gasoline demand was up 2.8% from a year ago and distillate demand was up .4% from a year ago.

Metals
June gold closed up $6.20 at $1,159.60, supported by today’s positive economic news.

A survey of mining analysts by the Chilean government expects copper to average $3.35 a pound in 2010 and $3.29 in 2011. May copper closed up a penny at $3.6105.

Currencies
Eurostat said that industrial production in the EU-27 was up .7% in February and up 3.5% from a year ago, stronger than expected. The June euro finished up .0060 at $1.3656, the highest close in three weeks.

The June Canadian dollar closed up .0030 at a new contract high of $1.0005, supported by steady improvement in Canada’s economy and positive expectations for commodities, in general.

Singapore’s government said that it expects GDP growth of around 8% this year.

Statistics New Zealand said that retail sales were down .6% in February, weaker than expected.