Stocks Rally As Upbeat Earnings Reports Continue

Stock market bulls got another feeding of delicious quarterly earnings reports on Tuesday. DuPont (DD), Netflix (NFLX) and Travelers (TRV) all made big advances after beating analysts’ earnings estimates. Netflix finished the day with a gain in excess of 24 percent.

The Dow Jones Industrial Average (DIA) gained 152 points to reach 14,719 for a 1.05 percent advance. The S&P 500 (SPY) jumped 1.04 percent to close at 1,578.

The Nasdaq 100 (QQQ) surged 0.90 percent to 2,835. The Russell 2000 (IWM) soared 1.37 percent to end the day at 927.

In other major markets, oil (USO) edged upward by 0.06 percent to close at $31.84.

On London’s ICE Futures Europe Exchange, June futures for Brent crude oil declined by a penny (0.01 percent) to $100.39/bbl. (BNO).

June gold futures declined by $7.20 (0.51 percent) to $1,414.00 per ounce (GLD).

Transports coasted on Tuesday, with the Dow Jones Transportation Index (IYT) advancing 0.33 percent.

European stocks made absurd gains on Tuesday, despite disappointing flash PMI data from Markit Economics. In a classic example of the “Draghi put”, bad news became good news because European investors have apparently decided that the latest batch of negative flash PMI reports will motivate the European Central Bank to lower interest rates. The Euro STOXX 50 Index finished Tuesday’s trading session with a 3.07 percent jump to 2,662 – crossing above its 50-day moving average of 2,643.

In Japan, stocks declined as the yen made a slight advance in the absence of any activity by the Bank of Japan to push the currency lower on Tuesday. A stronger yen results in less-competitive prices for Japanese exports in foreign markets (FXY). The Nikkei 225 Stock Average declined 0.29 percent to 13,529 (EWJ).

In China, stocks made steep declines following the release of the Markit /HSBC Flash Manufacturing PMI report, which indicated a decline to 50.5 in April from 51.6 in March. The Shanghai Composite Index sank 2.57 percent to 2,184 (FXI). Hong Kong’s Hang Seng Index fell 1.08 percent to 21,806 (EWH).

Technical indicators reveal that the S&P 500 rose further above its 50-day moving average of 1,546 to close at 1,578 – thwarting the possible formation of a head-and-shoulders pattern, which would have signaled a decline. Its Relative Strength Index rose to a healthy 56.40. Although the MACD remains below the signal line (suggesting the likelihood of a decline) the gap is narrowing significantly, with both the MACD and the signal line near positive 5.

For the day, all sectors finished solidly in positive territory. The financial sector was the clear winner, with the technology, energy and consumer discretionary sectors all advancing by more than one percentage point.

Consumer Discretionary (XLY): +1.03%

Technology: (XLK): +1.18%

Industrials (XLI): +0.72%

Materials: (XLB): +0.87%

Energy (XLE): +1.15%

Financials: (XLF): +1.77%

Utilities (XLU): +0.25%

Health Care: (XLV): +0.63%

Consumer Staples (XLP): +0.78%

Bottom line: The steady flow of better-than-expected earnings reports continued on Tuesday, sending the major American stock indices beyond a full percentage point higher. (Although the Nasdaq 100 fell a tad short, with a gain of 90 basis points, the Nasdaq Composite finished the day with a 1.11 percent advance.)

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