E-mini futures get optimism from strong earnings

Good day! I hope you've enjoyed the three-day weekend!

The market was wavering between the bulls and the bears as the final trading day for this past week kicked off on Friday. With just over an hour to go before the opening bell, the index futures were striking support in premarket trade. Both the S&P 500 and Dow Jones Ind. Average contracts were hitting slightly lower lows, creating a reversal strategy ahead of the open called a 2B. This is a type of double bottom in which the second low serves as a bear trap. The pace of the overall premarket selloff, however, made it questionable as to whether or not the indices would be able to gain enough momentum for another push to new highs for the year. It did not take long, however, for the momentum that build once the reversal was underway.

Among the data released on Friday were December retail sales, which rose 7% in 2010. Retail sales in December were up 0.6%. This was slightly less than an expected gain of 0.8%. Business inventories were up 0.2% in November. Meanwhile, the Labor Department reported that the Consumer Price Index climbed 0.5% in December. The core CPI rose 0.1%. This excludes the volatile food and energy prices. Later, the Thomson Reuters/University of Michigan Consumer Sentiment Index fell to 72.7 from 74.5 last month.

Dow Jones Industrial Average (Figure 1)

Earnings season kicked off slowly last week. The most notable ones ahead of the weekend were Intel's (INTC) on Thursday afternoon and JP Morgan's (JPM) on Friday morning.

Intel reported strong profits and sales and gapped higher into Friday's open after a number of brokerages raised their price targets on the shares, but it was still hit with selling out of the open and ended the session down $0.21 a share. Although Intel ended the session lower, semiconductor equipment manufacturers jumped after Intel announced that it would be spending $9 billion on capital equipment over the course of the year.

JP Morgan faired better than Intel following its earnings and was up approximately $1.50 a share by mid-afternoon. Nevertheless, it did give back two-thirds of those gains in the final two hours of trade after the 14:00 ET reversal period hit. It ended the session higher by $0.46 a share.

Earnings season will be gaining momentum this week and will include 10% of the S&P 500 companies. Citigroup (C), Apple (AAPL), and IBM (IBM) will be reporting their quarterly earnings on Tuesday. Wednesday's slate includes Goldman Sachs (GS) and Wells Fargo (WFC), while Morgan Stanley (MS), Google (GOOG), and Advanced Micro Devices (AMD) report on Thursday. Bank of America (BAC) and General Electric (GE) will be reporting ahead of Friday's opening bell.

The latest housing data will also be released this week and includes the National Association of Home Builders and Wells Fargo housing affordability index, building permits and housing starts, as well as existing home sales.

S&P 500 (Figure 2)


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