foxex: Retail Trading

Read in Browser

Chart Advisor | Focus on the Price

By Gordon Scott, CMT

Tuesday, April 14, 2020

1. Earnings, COVID data bring optimism

2. Retail sector rises in anticipation

3. Financial sector part two

Market Moves

U.S. stocks closet strongly higher today. The S&P 500 index (SPX) and the Nasdaq 100 index (NDX) were up four percent, while gold continued higher, oil fell, and bonds remained unchanged. This outcome followed the report from JP Morgan Chase (JPM) on quarterly earnings. The report featured a miss of over one dollar per share. Despite this, the stock actually opened higher for the day, though it sold off throughout the session. The reason the shares didn't collapse by nine or ten percent, as option sellers had prepared for, likely had to do with the fact that the bank was taking action to stem losses expected to occur from defaults in the next quarter.

In general, the market's reaction to the news coming out of the financial sector was quite optimistic. Perhaps the fact that the COVID-19 data seems to suggest the peak of new infections has passed in both worldwide cases and those in the most severe hot-spot, New York City (see charts below, data courtesy corona.help).

Retail Sector Rises in Anticipation

The biggest sellers of household items, Walmart (WMT), Costco (COST) and Amazon (AMZN) outpaced their sector and the broad market indexes. And that's saying something on a day when stocks rose four percent.

The chart below compares the three major retailers with State Street's Consumer Staples index ETF (XLP). Of the four stocks, the one most interesting is Amazon, which actually broke out to a new high for this year as well as a historic high. Considering how much of the economy is being funneled into these outlets, is it possible to that once they are re-opened for business, the U.S. and world economy could rebound quickly? These charts would suggest the answer is yes.

Bank of America Stock Has Become Oversold on Weekly Chart

Amazon Stock Hits All-Time High

SPONSORED BY FIDELITY INVESTMENTS
How do taxes fit into your overall investment strategy?
Our advisors can provide you with personalized, tax-efficient strategies.

LEARN MORE >

Financial Sector Part Two

Now that JP Morgan Chase and Wells Fargo (WFC) have released their dire earnings reports, and the markets seemed to have taken them in stride, it will be interesting to observe the reaction of the markets to two more financial companies, Goldman Sachs (GS) and Bank of America (BAC), which report earnings before the market opens on Wednesday.

Since the bad news is already anticipated, it may be priced in. Between the two stocks, shares of GS seem to show relative strength over BAC and the State Street Financial Sector index ETF (XLF) as shown in the chart below. If GS shares continue higher after tomorrow it will serve as an additional indicator of investor optimism.

The Bottom Line

Stock prices moved strongly higher even after terrible news from the first financial companies to report earnings. This seems to suggest that optimism over a pending economic restart after the COVID-19 pandemic is building. Big retail stocks are thriving and two more financial companies report earnings tomorrow.