EmailIBM (IBM) plunged 8.3% on Friday, General Electric (GE) dropped 4.1%, and McDonald's (MCD) declined 2.0%. With downtrodden performances like that from some of the most widely-held, blue chip stocks, the market must have taken it on the chin as well. Not! All the market did was gain 0.9% despite those performances.
Google (GOOG) and Microsoft (MSFT), which surged 4.4% and 3.4%, respectively, after their earnings reports, helped fill in those price gaps. Their positive showing and some buy-the-dip action enabled the market to finish an otherwise tough week (-2.1%) on a winning note.
Freeport-McMoRan (FCX), the embattled mining company, perhaps exemplified the buy-the-dip trade the best. Having plummeted 12.3% in first three sessions last week ahead of what was a disappointing earnings report before the open on Thursday, FCX gained ground on both Thursday and Friday.
Today, Caterpillar (CAT) looks to be following in those same footsteps. The Dow component dropped 5.4% last week, but is indicated 0.4% higher this morning despite posting a first quarter profit of $1.31 per share that was seven cents below the Capital IQ consensus estimate and issuing FY13 guidance that is comfortably below the current consensus estimate.
The early indication for CAT would suggest there is a sense the bad news was already priced into the stock. That resilience, and the market's resilience on Friday despite some high-profile earnings disappointments, has contributed to the positive disposition in the futures market.
Broad-based gains in foreign markets have also contributed to the early, upbeat tone. Japan's Nikkei jumped a tidy 1.9% as investors were relieved to learn the G20 did not voice objection to the country's monetary policy. Meanwhile, the news that Italian President Giorgio Napolitano was re-elected to another term has reportedly underpinned European bourses on the belief that Italy might be able to avoid a snap election.
The response to the Italian news is an over response in our estimation, yet getting carried away on the mere thought that a worst-case scenario can be avoided has been a default trade for years now.
Currently, the S&P futures are trading 0.2% above fair value. That is setting the stage for a modestly higher open for the cash market in front of the Existing Home Sales for March (Briefing.com consensus 5.01 mln; prior 4.98 mln) at 10:00 a.m. ET.
This is going to be a very heavy week of earnings reporting with 10 Dow components and nearly 200 S&P 500 companies delivering their first quarter results. So far, earnings have been mostly better than expected while sales have been mostly disappointing.
