The indices finished near their best levels of the session as a Fed policy statement that offered no surprises helped investors refocus on the bottom line -- another batch of better than expected earnings reports. Although it posted a small gain, the Dow closed at another record high.
As expected, the Fed left the overnight lending rate unchanged at 5.25% for a third straight meeting. Given that the risk going into the report was that it would place a heightened emphasis on inflation concerns, acknowledgement that "the economy seems likely to expand at a moderate pace," but not at such a strong pace as to suggest the Fed is on the brink of tightening again, offered some relief.
Further, Richmond Fed President Jeffrey Lacker was the only member preferring a 1/4% hike. While Lacker's third straight dissention made the Fed's pause less compelling, it also lent some credibility to the Fed's focus on keeping elevated levels of core inflation under control. While the language of the policy statement was essentially the same, Wednesday's directive excluded the reference about the "prices of energy and other commodities" having the potential to sustain inflation pressures over time.
Directing the market's gains, though, was in fact strong leadership from the profit engine that is Energy (+1.7%) as a 3.4% surge in oil prices renewed optimism about the sector's ability to generate strong profits. To wit, ConocoPhillips (COP 62.84 +1.44) handily beat expectations while Exxon Mobil (XOM 70.95 +1.06) touched a new all-time high intraday ahead of its earnings report Thursday morning. Crude oil futures closed at $61.37/bbl following an unexpected drawdown in weekly crude supplies and amid reports of more unrest in Nigeria.
Among Wednesday's biggest names reporting was Altria Group (MO 82.10 +2.28), which missed analysts' expectations but surged nearly 3% after raising its full-year profit outlook and finally setting a timetable for spinning off its 88% stake in Kraft Foods (KFT 35.31 -0.05). Also lending support to the Consumer Staples sector were strong Q3 reports from Colgate-Palmolive (CL 62.11 +1.64) and Reynolds American (RAI 65.27 +0.87).
As evidenced by the Nasdaq turning in the best performance among the majors, Technology also offered some notable leadership. Semiconductor Equipment (+3.2%) got a big boost from KLA-Tencor (KLAC 49.59 +3.83), which posted a 30% jump in Q1 revenue and raised its outlook for Q2. Adobe Systems (ADBE 38.94 +0.85) backing its Q4 guidance lent support for the software group.
Amazon.com (AMZN 37.68 +4.05), which is a component in the Consumer Discretionary sector, soared 12% after announcing cutbacks to improve margins. Its report gave a boost to Internet stocks across the board. Conversely, General Motors (GM 34.71 -1.48) acted as a drag on the sector, as its better than expected earnings report was greeted with a sell-the-news response. GM had gained nearly 9.0% over the last three sessions to a 52-week high in anticipation of a solid report.
The Industrials sector was also in focus after Dow component Boeing (BA 80.83 -2.76) topped expectations; but a shortfall on revenues and revised FY06 guidance offset strong earnings-induced gains from Norfolk Southern (NSC 53.73 +4.93) and Ryder System (R 53.60 +1.54). The latter two helped the Dow Jones Transportation Average hit its best levels in three months.
Failing to participate in Wednesday's market gains was Health Care. Express Scripts (ESRX 66.01 -6.24) posted a 13% year/year rise in Q3 earnings, but shares plunged 8.6% after management said proposed changes to benchmark drug pricing would have a material adverse effect on its future results. In addition to weakness in PBMs, Wednesday's worst performing S&P industry group, HMOs, was also a weak spot after a cut by WellPoint (WLP 76.53 -2.09) to its full-year enrollment forecast overshadowed a 27% year/year rise in Q3 profits.
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1.
AEM - AGNICO EAGLE MINES
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-26-06 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 34.60
|
2.
SLW - SILVER WHEATON CORP
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-26-06 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 10.57
|
3.
HMY - HARMONY GOLD MNG
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-26-06 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 15.33
|
OS - OREGON STL MLS
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
|
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* did not setup
|
RIMM - RESEARCH IN MOTION
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-25-06 |
|
Long |
117.36 |
Reached (118.39) |
Closed below 117.36 |
up to + $ 1.34 per share (118.70) |
|
* 10-25-06 - stock gapped down.
|
BSC - BEAR STEARNS
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-25-06 |
|
Long |
154.06 |
Reached (154.68) |
Closed below 154.06 |
up to + 96 cents per share (155.02) |
|
|
SHLD - SEARS HLDGS
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-23-06 |
10-25-06 |
Long |
175.05 |
175.92 |
Closed below 177.54 |
up to + $6.15 per share (181.20) |
|
* 10-23-06 - stock gapped down.
|
CNI - CANADIAN NATL
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-19-06 |
|
Long |
45.21 |
Reached (45.70) |
Below 47.06 |
up to + $2.39 per share (47.60) |
|
|
ICE - INTERCONTINENTAL EXCHANGE
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 10-17-06 |
|
Long |
82.66 |
Reached (84.00) |
Below 83.00 |
up to + $2.47 per share (85.13) |
|
|
==============================
EOD = End of day.
LOD = Low of day.
PDC = Previous Day's Close.
S/R = Support/Resistance.
==============================
DISCLAIMER: Trading in securities may not be suitable for all individuals.
Consult your broker or other professional to determine your suitability.
The discussions provided by Day Trading It are for educational purposes
only and should not be taken as a recommendation to buy or sell the
referenced security. Past performance is not indicative of future results.
Please keep in mind that these picks are chosen up to 12 hours before the markets open. During this time conditions, which will effect entry and exit on the above listed ideas, may change.
