The gain in the S&P 500 and the DJIA was only about 1% on Thursday which isn't bad coming on top of big gains the prior two days but what was most impressive about this market was the underlying action. For example, the Nasdaq Biotechnology Index Fund ETF (IBB) was up 3.85% today which is the biggest gain in some time. Small caps (IWM) were up 2.2% and Semiconductors (SMH) blew the doors off with a move of 4.76. If the indices had this sort of action we'd be hearing quite a bit about the excessive euphoria.
I have written quite a bit lately that a sign of a better market would be when stock picking mattered again. That was the case today as the focus was on individual stocks much more than just the action in the indices.
The moves today were quite a bit and stocks may not be overbought and in need of some consolidation. But there is now some good support and that will give us some better entry points unless the indices totally collapse again.
Starbucks (SBUX) reported a mostly in-line report after the close and is selling a strong positive response which is probably a good sign that expectations were quite low. In view of the slowing growth there I'm not sure why there is interest in chasing it, but as I noted it is viewed as a safe haven name with consistent earnings.
The reaction to Apple (AAPL) earnings is going to be particularly important. This big run-up over the last three days creates a strong "sell the news" setup but it may be too obvious to work.
Apple reported EPS of $2.91 versus expectations of $2.78 and slightly better than expected revenues but the stock is trading down over $9 in in the initial reaction to the news. Guidance is still to come but this market wanted a much better beat and, as I discussed this morning, this was a "sell the news" setup. The report had to be perfect to keep Apple running and it apparently is not.
The value buyers are usually pretty quick to jump in Apple but after what happened to other FAANG names recently there is going to be some worry here that Apple may end up acting like Amazon (AMZN) did after its report.
This response to Apple was the big problem for this market and we'll have to see how much it will spill over to other areas.
Have a good evening. I'll see you in the morning.