Bulls press to fresh highs on news from GE, bullish reports from the semis and maybe optimism in front of this afternoon’s FOMC directive. As of 11:00 ET the SPY (SPY) is up 0.50% and breaking through well-watched resistance aimed at converting any would-be naysayers that this bull isn’t for real.
The few traders and programs participating in front of Fed’s decision on rates and more importantly—fresh hints of policymaker’s monetary path during the remainder of the year and beyond appear intent to float the broader market optimistically higher.
The FOMC will release its statement at 2:15 ET with the fed funds widely anticipated to stand pat at 0.00% - 0.25%, but the debate over future policy grows increasingly hot. As for Tuesday’s bulls, support appears to be stemming from the idea of key language such as rates remaining low for “the foreseeable future” or “extended period” will remain in the policy statement.
The optimistic outlook comes despite increased trader talk of the Fed laying the ground work for an eventual nudge. With a growing faction inside the Fed’s own ranks regarding inflation and how the economic recovery is shaping up, a shift in its directive and fresh wording along the lines of “low rates for some time” or vowing to maintain an “accommodative policy” could be in the offing.
In those other sometimes intertwined markets, strength in the broader market is being supported by what amounts to optimistic weakness in the US Dollar (UUP) and an enthusiastic push into equally happy-go-lucky commodity plays. Leading for the bulls, the US Oil Fund (USO) is up 2.10%, while the Gold Miners ETF (GDX) is adding 2.55%.
On the manufactured economic front, housing starts fell 5.9% during February to 575,000 annually adjusted pretty, pretty boxes. However, the hard slide was hardly a surprise due to hard-hitting storms gripping much of the nation and today’s data actually bested well-prepped for Street views of 570,000.
At the same time, January’s data was revised sharply higher to 622,000 and the most robust levels seen in more than a year. Further, building permits data which measure future intentions bested consensus views with its dip of just 1.6% month-over-month to 612,000 versus estimates of a decline to 601,000 annualized units.
Separately, import prices slid by 0.3% for February and above forecasts calling for a drop of 0.2%, with black gold-related products largely responsible. Export prices also fell but by a harder 0.5% and well-removed from analyst estimates of a 0.3% gain.
On the corporate side, financials (XLF, C and ZION) have found support after a couple sessions of relative weakness. Shares of General Electric (GE) are in the spotlight following upbeat comments at a Goldman Sachs conference.
The company said it expects its GE Capital unit’s losses to peak this year and growing earnings power thereafter. For its entire operations, management is pegging FY10 profits at $1.03 and above Street views of $0.99 and intends to resume dividend growth in 2011.
Intraday, shares of GE are up 2.50%, airborne above its daily Bollinger and testing weekly pattern resistance or breakout levels, depending on one’s point of view.
In other influential sector hot spots, Intel (INTC) and fellow semiconductor outfit Microchip (MCHP) are helping buoy the group (SMH) following yesterday’s bearish outlook for equipment manufacturers. The world’s largest saw JMP Securities raise its CY10 and CY11 EPS estimates by five cents to $1.85 and further north of consensus forecasts of $1.64 and $2.10 versus $1.80 respectively. Analysts from the firm cited ongoing server products momentum as a key driver.
Separately, Microchip boosted its guidance above Street views of $0.36 per share to $0.42 and above its prior range of $0.39 - $0.41. Management sees its Q4 revenues to be up by roughly 8% from year-ago levels and expects its gross margins to come in around 59.35% and at the high end of its prior guidance.
Shares of MCHP are up 1.75%, while SMH tacks on a leading 2.75% based in large part on INTC’s solid 3.45% bid to fresh intermediate highs, as well as bargain-hunting in Monday’s down and apparently not out equipment (KLAC, LRCX) names.
Chris Tyler
Senior Staff Writer & Options Strategist
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