The S&P staged a last gasp rally to keep its record unblemished for the week, but the Dow was the big winner on Friday because of two big winners: Microsoft (MSFT) and International Business Machines (IBM). In fact, the Dow finished 0.76% higher despite only 13 of 30 companies in the index finishing higher on the day.
Excitement is resurgent in former tech leader Microsoft (MSFT) after a strong quarter. The stock climbed higher immediately following its earnings report last night, and investors continued to buy it up during today’s session. MSFT closed the day up 5.7%.
International Business Machines (IBM) followed a similar pattern at MSFT, even tho its percentage gain – at 4.4% – was slightly lower. These tech bellwethers had become afterthoughts for growth hungry tech and momentum investors, but appear to making a comeback. Warren Buffet made IBM his only tech investment stake in 2011, and perhaps IBM is on its way to fulfilling the promise the legendary investor sees in it.
The Nasdaq finished marginally lower Friday, which can be considered a moral victory following a dismal earnings report from Google (GOOG). The stock opened more than 7% lower this morning after missing EPS estimates by $1 ($9.50 vs $10.50), and investors were not excited about buying the dip today. GOOG continued to trade lower all-day, finishing down 8.4%.
The banks, once an ominous weight on the market, are now leading the charge. The strength in the sector comes despite some shaky numbers over the last two weeks. However, it appears the market was pricing in calamitous earnings for the financial sector, and the “not so bad” reports we have seen were enough to attract buyers at depressed levels. It will be very interesting to see next week if that strength can continue.
Now with Options Expiration out of the way today, the action could start to heat back up next week. There appear to be highly contrasting opinions in the market right now. Many believe we could on the precipice of a monster bull run, on the strength of a recovering US economy and subsiding fear in Europe, while others believe the herd is once again being lulled into a sense of complacency before the slaughter. We are technical analysts, so we will just be watching the price action and looking for the best risk-reward scenarios to put money to work based on the charts.
Disclosures: Scott Redler is long SPY, WMT, XLF, OIH, GOOG calls, VXX. Short DIA.