Good day! Earning season kicked into gear first thing on this shortened trading week with Citigroup (C) and Delta Airlines (DAL) among those that released their earnings prior to Tuesday's open. Both companies severely disappointed investors.
Citigroup (C) fell 6.43% after it missing earnings by about 50%, sending banking shares lower. Citigroup did still post its first profit since 2007, however, earning 4 cents per share, excluding one-time items. Wells Fargo (WFC) reports on Wednesday, while Bank of America (BAC) reports on Friday.
Delta (DAL) also missed earnings estimates even though it posted a gain of 19 cents per share. The miss was blamed on rising fuel costs, putting pressure on other airlines as well. Delta shares fell 8.24% on the day.
Dow Jones Industrial Average (Figure 1)
Despite pushing higher in the early-morning hours, the index futures began to selloff steadily around 7:00 a.m. ET into the opening bell. The bell coincided with strong price and moving average support and the markets popped.
The Dow Jones Ind. Average ($DJI) was the strongest of the three major indices throughout premarket and intraday trade on Tuesday. Boeing (BA) led the index after the company announced that the delay on the release of its first 787 would not be extended even further. The first one is expected to be delivered in the third quarter.
Although the Nasdaq ($COMPX) managed to outperform the S&P 500 ($SPX), the index futures were greatly impacted on Monday after Apple (AAPL) CEO Steve Jobs announced plans to take another medical leave of absence. Apple shares struggled to recover from sharp premarket losses, pushing higher throughout the session, but it still ended the day with a loss of 2.25%. The remaining losses were wiped out following Apple's earnings, which were released after the close.
It seems obvious that the Jobs news was timed to have the least impact and feelings that investors would be quickly reassured, at least temporarily, by stellar earnings. Apple's earnings blew through estimates Tuesday afternoon. The company earned $6 billion, or $6.43 a share, with revenue of $26.7 billion. Net income rose 78% year-over-year. Analysts were anticipating earnings of $5.38 a share and revenue of $24.4 billion. The iPad and iPhone played a pivotal role in this success.
S&P 500 (Figure 2)
Even though earnings were not released on Apple until after the closing bell, the Nasdaq showed no continuation of Monday's weakness. While the stronger Dow took the lead intraday, the S&P 500 and Nasdaq remained strong. They rallied throughout the initial 15 minutes of the day and then fell into a solid trading range consisting of two primary waves of correction into the 5 minute 20 period moving average. The second correction was slower than the first and maintained the bullish bias. This created a buy setup that triggered at 11:00 a.m. ET. A continuation of this strategy took place at 12:30 ET and the indices continued to creep higher throughout the afternoon, although the market lacked the stronger setups of the first half of the day.