Daily Market Update – April 14, 2015 (Close)
It started this morning with Johnson and Johnson reporting, then followed by JP Morgan and Wells Fargo.
Those three have a combined market capitalization that so large that it’s even about 10% larger than that of Apple.
But the good news is that the first 2 major banks to report did nothing to surprise markets and actually beat on revenues.
Johnson and Johnson, which was the first of this season to report with significant currency considerations did report the effects of the stronger dollar and did reduce forward guidance, but as expected, investors were prepared to hear that kind of news. More importantly, the news wasn’t so bad as to have exceeded those expectations.
That’s a good start for what may still be a challenging few weeks ahead, but at the very least the major banks do very often at least set a tone when they’re not behaving badly and thus far this morning the behavior is unremarkable and restrained.
The market too, during its pre-open futures trading is equally restrained and unremarkable.
Given the 3 options of behavior that existed as earnings season gets underway, the same 3 options that exist every day, being restrained and unremarkable can be a good one, if it’s sustained for a while and if any deviations from restraint are soon brought back into line.
Given a portfolio of holdings, some of which are covered, some of which are longing for cover, you can have different hopes for what trend the broader market will be following.
If I had all positions covered I would love seeing a restrained, unremarkable and flat market with occasional punctuations higher and lower. That would make a nice environment for rollovers. That’s the best of all situations when you just roll over position after position and see the income come in on a regular basis.
But when there are uncovered positions the hope is for the ability to see new cover and that typically requires the kind of high tide that pulls everything along. That usually also leads to assignments and rollovers, as well.
So with all of those uncovered positions a flat and restrained market just won’t do it.
While it’s definitely better than a downward moving market at this moment, I’d still like to see this morning’s earnings reports perhaps be the first among a series of non-disappointing reports, that could perhaps serve as the fuel for a move higher.
Until more positions are covered there’s no reason to want to see a lower move by the market. Those are nice to have when you’re sitting on a pile of cash or had a large portion of your holding suddenly called away by a large move higher.
I don’t think that’s going to be the case, although this week’s expiring positions are still in good shape for assignment if the market can avoid any large move lower.
This morning’s early indications following the earnings releases of Johnson and Johnson, JP Morgan and Wells Fargo at least gave some hope for the prospects of the rest of the week. It was nice to see the market trade reasonably well for the day, especially continuing some recovery in energy positions after the rough day last Friday.
With Intel releasing its earnings this afternoon and the post-sessions market’s first response being a positive one, there’s at least some hope that currency headwinds won’t be the kind of drag that was feared, although there’s still lots more to go.