1:00pm (EST)
The market started the session off in negative territory after a poor reading on manufacturing activity in New York gave the bears some confidence. The Empire State Manufacturing Survey Index for September came in at 4.1, which was below estimates of 6.4. The results were significantly lower from the 7.1 reading last month. The bottom line is that the manufacturing side of the economy is not expanding in New York and now appears to be contracting at an accelerating pace.
Despite the negative news, the bulls have managed to find a way to push the market higher, albeit, slightly.
The Dow is showing a gain of 32 points and is at 10,558 after touching a low of 10,480 while the S&P 500 is up 2 points to 1,122. The Nasdaq is higher by 8 points to 2,298. We wouldn’t be surprised to see a flat day on all the indexes as both the bulls and bears seem tentative heading into the second half of trading. Remember, our tops are Dow 10,600; S&P 1,125; and Nasdaq 2,300.
There are still plenty of economic reports due out this week that will move the market and we are expecting a big day on Thursday as far as earnings with FedEx (FDX, $85.44, up $0.35) and Research In Motion (RIMM, $45.05, down $0.05) giving Wall Street an update. FedEx will announce before the opening bell, RIMM after the closing bell.
FedEx will likely be a major market mover as it is a member of the Dow. Analysts are looking for the company to report a solid quarter with average estimates pegged at $1.21 a share. This would more than double last year’s performance for the quarter.
We expect RIMM to miss earnings but there is a chance they could report in-line or better than expected results. Our concern is that the iPhone and Android are taking market share away and sales of RIMM’s new model aren’t making a meaningful impact in gaining back market share that the company is rapidly losing.
There have been a slew of analysts’ downgrades in recent weeks, which has caused shares to sink to recent 52-week lows. If by chance RIMM does beat expectations then there could be a massive short-squeeze and we wouldn’t be surprised to see shares rally past $50. However, if the company reports lousy numbers and they miss by a mile then we are looking at $35 stock. In other words, we are expecting a big move on Friday.
As far as economic news on Thursday, the big news before the bell will be the weekly initial claims for unemployment insurance. Last week, they fell 27,000 to 451,000 which marked the third straight week of declines. Initial claims have also been locked in a tight “trading range” just like the current market so any surprises could move the market, dramatically.
If the current rally is going to continue, we will need to see weekly claims under 400,000 to signal that the economy is adding enough jobs to make a dent in the unemployment rate. If the number comes in over 500,000 then we could see a major sell-off.
The current market environment feels like something big is about to happen.
We will be back in the morning at 9am with the latest and greatest and watch for the breakout or breakdown to unfold over the next few days and into next week. On that note, subscribers, check the Members Area for the updates.
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