Financial stocks, one of the two sectors driving this week’s rally, ran into profit taking today as investors decided not to push their luck with earnings from Citigroup (C) due for release on Friday, July 17 before the market opens.
Technology stocks took up the slack with IBM (IBM), up $3.42 for the day, and Google (GOOG), up $4.43, leading the way. Both stocks announced earnings for the second quarter after the market’s closing bell and both companies beat Wall Street earnings projections handsomely–by 30 and 27 cents a share, respectively.
But investors hoping for a clear sign that the stock market is about to bust out of the trading range of 880 to 950 on the Standard & Poor’s 500 stock index got handed another cup of ambiguity after the close.
Although shares of IBM kept climbing, tacking on another $1.78 in trading after the bell on news that the company was raising revenue and earnings guidance for 2009, Google, on the other hand, sold off hard. That stock dropped $10 a share.
It wasn’t that Google’s results were so bad. Indeed the company announced the 15% increase in the number of paid search clicks, even as revenue per click fell, that analysts were expecting. But that there was nothing in the numbers to give investors a reason not to take profits after the day’s gain.
The sell off brought Google back very close to the $428 a share price it hit when the June rally came to an end.
The profit-taking in financials and in Google is yet more evidence that investors aren’t inclined to trust this rally to run very much higher.
Check the action on IBM and Google tomorrow after the open. If the full market bids them higher, then the technology stocks have a chance to keep this rally running. If IBM and Google sell off in the full session, as they did in the smaller after-hours market, then investors as a whole have cast their votes against this rally having much longer to run.
What to do with FCX–Freeport McMoRan Copper & Gold–depends on your read of why copper has rallied. There’s a lot of evidence that Chinese buying drove the copper rally but that much of the buying was either restocking of inventories or stock piling in case of future shortages. That says that copper prices are peaked and it would be a good time to take some profits. That’s my take. The other side is that what we’re witnessing is a return to real growth in the Chinese economy. I won’t believe that until I see exports pick up. But there is a huge group of investors who think real demand from China is back. That’s about the best my crystal ball can do now.
Jim,
Welcome back! It was a long 2 months. I definitely always appreciate your market insight and reasoning.
I have a question about FCX. I did not sell and have been holding for the 200% spike off the bottom but have been wondering your thoughts on this? I own a large position in BHP and TC and it seems FCX is the weaker of the bunch. Have we seen most of the short term recovery and this trend will be put on the back burner for awhile.
Extremely happy you are back in the new format!
months like we had in last OCT, NOV and March.
Jim,
I been reading your opinion from last couple years and I think you were little more bullish when market was bearish and you are little more bearish when market is currently bullish. Do you think march low was the “the low” or your opinion has changed? Do you think we will get another opportunity in next 9
Jim,
Welcome back! And thanks for the past insights. I’m curious about your cash position? Also, I’m currently short some “weak sisters” in the financial/RE space COF, MET, SPG. I know you don’t short, but I’m wondering where you stand in general on stocks like these? Thanks again!