The day started off on a very positive tone thanks to Google’s better than expected earnings report after Thursday’s close. Shares of GOOG ended the day up 20% ($90). Google reported earnings of $4.84 per share which handily beat the analysts’ estimate of $4.52 per share. Sales were expected to be $3.61B, but Google reported sales of $3.7B. Paid clicks, the stat everyone was concerned about, was up 20% in Q1. Large-cap stocks and the NASDAQ were the relative winners on the day.
The other big news on the day came from Citigroup when it announced a $5.1B Q1 loss and 9,000 job cuts. Citi wrote down or adjusted about $16B worth of assets. The quarterly loss was not as bad as some analysts had predicted. The company’s CFO stated to CNBC that there is no need for Citi to raise more capital or cut its dividend. The financial sector was up big off of this news.
Off of this news, the dollar was very strong in the morning causing oil prices to slip, and gold was getting hit hard all day with selling pressures. However, everything began to reverse course around lunchtime. Oil rallied and hit another all-time high of $117, the dollar did not keep all of its gains, the VIX (volatility index) bottomed, and buyers of Treasuries came back. The 10-year was yielding 3.85% at lunchtime, but by the close it was only yielding 3.74%. I was a little skeptical of such a big rally off of the bad news from Citi, and I wasn’t surprised the market began to reverse. I actually shorted the heck out of Citi with an extremely short-term thesis (a few days) that the stock got too much of a pop and a pull back was necessary.
Strong earnings reports from Caterpillar and Honeywell also aided in the rally. CAT beat analysts’ estimates thanks to strong international sales. The company reported earnings of $1.45 per share compared with a consensus estimate of $1.33 per share. Shares were up 8.5% on the day. Honeywell beat analysts’ estimates and raised its sales guidance. HON reported earnings of 85 cents per share while analysts were only looking for 82 cents per share thanks to strong international, specialty materials, and aerospace-related sales. What’s the trend here? Lots of international exposure! The dollar has declined significantly since the beginning of the year and it looks as if analysts have not fully taken this into account when coming up with their estimates.
I’m looking for a weaker open Monday as investors take some profits and digest all of the new earnings data that will be reported.
DJIA 12,849.36 +228.87 (+1.81%)
Nasdaq 2,402.97 +61.14 (+2.61%)
S&P 500 1,390.33 +24.77 (+1.81%)
NYSE Volume 4,190,694,000
2-Yr Bond 2.19% +0.06
10-Yr Bond 3.77% +0.02
30-Yr Bond 4.51% -0.03
Crude Oil (May) 116.69 +1.83
Nat Gas (May) 10.587 +0.204
Gold (June) 915.20 -27.70
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