Stocks Rally As Earnings Season Begins
Stocks ended higher last week as investors digested a busy week of macro data and earnings season officially began. The big bullish catalyst last week came from global central banks. The U.S. Fed and the European Central Bank (ECB) made dovish comments which prompted buyers to return from a 4-week hiatus. First, Janet Yellen softened her recent slightly hawkish stance when she gave a somewhat dovish testimony on Capitol Hill. Second, the ECB said it is ready to print money (continue QE) for the next few years. This was a bullish one-two punch that helped buyers return to the market. Earnings season officially kicked off last week and a slew of companies will be reporting over the next several weeks. Remember, in addition to analyzing the data, we focus more on how the market reacts to the data. Three of the big banks opened lower on Friday after reporting earnings: Wells Fargo (WFC), JP Morgan (JPM) and Citigroup (C). So far, that is not ideal but we’ll see how it plays out over the next few weeks.
Thur & Fri Action:
On Thursday, stocks rallied helping the Dow hit a fresh record high. The ECB said it is ready to continue QE for the next few years which is also a very dovish stance. Remember, the entire move from the historic 2009 low was based on easy money from global central banks. So the fact that they are still ready to shift back to an ultra-easy money stance was enough to bring buyers back into the market. Stocks edged higher on Friday after Wells Fargo, JP Morgan and Citigroup all reported earnings. Interestingly, all three stocks fell in the morning but the broader market still rallied.
Market Outlook: Bulls Defend Support
The bulls showed up and defended important support in June which is very bullish for the market. As we have said several times over the past month, as long as support holds, the bulls remain in control of this market. As always, keep your losses small and never argue with the tape. Get Our Free e-Book: Learn How To Buy Leading Stocks…EARLY. Get It Here…