Pre-market strength faded on a hot PPI report and earnings misses by JPMorgan Chase (JPM) and Bed Bath & Beyond (BBBY) , but dip buyers took advantage of the weak open and provided an upward push at the opening bell. While there isn't strong momentum, breadth is running strong at over 2 to 1 positive, and there is some relative strength in small-caps and growth names.
My main strategy right now is short-term trades and very small incremental buys for the longer term. Most charts need further development before they offer good entry points, and solid fundamentals are not providing much in the way of safety.
I've been looking for stocks that might benefit from higher interest rates and came across some research this morning from Morgan Stanley (MS) , which names Charles Schwab (SCHW) a "Top Pick." The analyst believes that SCHW is one of the most interest-rate-sensitive stocks in the market and, unlike banks, it does not have credit risk.
Brokers such as Schwab no longer need to charge commissions for stock trades because they make big money from margin lending and cash sweeps. Higher interest rates are just pure profits in this situation. Morgan Stanley has a price target on SCHW stock of $132 versus the current price of around $82.
Schwab reports earnings on the morning of April 18. It is sitting on support at its 200-day simple moving average and is trading at a 25 P/E with expected EPS growth of about 25% per year based on current estimates.
I started the position Wednesday morning and will be looking to add to it as it develops.
