Tuesday’s Market Recap: Stocks fell for second day in a row. Traders, bracing for a grim earning season, took some profit off the table from the mammoth rally in stocks for 4 consecutive weeks. There were no major events that could have pushed the markets up. The trading volume was very light, just as on Monday.
The Dow lost 186 points or 2.3% to 7790, and the S&P 500 was down 20 points or 2.4%, at 816. The Nasdaqshed 45 points or 2.8%, to 1562. The losses were broad based. Only 2 Dow members ended positive for the day, and about 90% of S&P components ended the day in red. Commodities trading was mixed. Crude closed at $49.28 per barrel, down 3.5%. In contrast, Gold rose $10.10 or 1.2% higher to close at $883.30 per ounce.
TaurusTrader portfolio had a mixed day. Position in WFC was stopped out for 8.4% loss. If you remember, TaurusTrader still has a small position inWFC, which was bought @ $13.75, a couple of days earlier. At the end of the day, the portfolio had 12 positions – WNR, AGU, AMR, FCN, HON, HSP, WDC, TNA, EXP, FMX, CMED, andOMTR. And, small positions in WFC and MS. BCE andRRC are still on the focus list, but have not hit the ‘buy limit’.
Market Watch for Wednesday, April 08: The Dow component Alcoa (AA) unveiled its latest quarterly result, thus kicking off the new earning season. AA reported a loss of 59 cents a share, about 3 cents worse than the estimate, but the revenue came in slightly ahead of consensus. AA Shares were slightly lower (about 1.5%) in after hour trading.
On the retail front, the home goods store, BBBY also reported after the markets closed today and topped the estimates. Consequently, BBBY shares were trading up over 12% in the after hour trading.
However, the ag fertilizer giant MOS provided a dismal report. The net income of MOS fell 88% due to rising materials costs and falling sales volumes. The company also warned potash sales would continue to be weak in the fourth quarter. MOS shares fell about 6% late trading.
There was a lot of optimism around MOS. If you had recently watched Fast Money on CNBC, you know what I mean! However, if you were a regular reader of this blog, you probably were not surprised by the poor quarter by MOS. In my blog on April 1, while talking about DE, I said ” ….. In fact, …… there was a newly released negative USDA report that could potentially impact fertilizer and ag equipment stocks. US farmers will be planting more soybean acres, a crop that requires less fertilizer and equipment utilization compared to corn …….”. So, you were warned ahead of time!
Ag and fertilizer stocks will be affected tomorrow in sympathy with MOS. I’ll watch our AGU position carefully, even though AGU is not similar to MOS in its business dealings. AGU makes bulk of its revenue in selling and distributing seeds, ag chemicals, and nitrogen fertilizer. And, it reported a stellar quarter a few days ago.
So, it should be a interesting day of trading on Wednesday. The earning reports discussed above may have some impact on overall market at the open, but probably a minimal impact toward the close. Again, for the quarter in general, the expectations are very low, and nobody expects the first quarter earnings to be good. Companies were conservative and lowered their expectations substantially. Very few have warned recently. This could mean that there may be relatively few negative surprises.
Potential market moving events on Wednesday are – 1) Federal Reserve will release its March meeting minutes, which should provide more details on the state of the economy. Also, 2) SEC is expected to discuss proposals related to the re-institution of the uptick rule for shorting stocks.
TaurusTrader swing portfolio is long in 12 positions and is well diversified. I do not want to add any new position at this time of market uncertainty. However, I will watch my positions closely with tight stops.
If there are questions or comments, please do post ….
Happy trading …