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Can Technology Earnings Tear Stocks Free From Limbo?

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April 22, 2015

Technology earnings queue up in the post-close hours, a cap to blue-chip earnings that delivered mostly bullish news. Revenue continues to be the pain point for stock investors, which means that any upside revenue surprises are being met largely with relief. I mean, you can cut costs for only so long until the sales need to show up!

The S&P 500 (SPX) continues to hug a bearish trend line around 2110, with participants apparently unwilling to give it a major test considering the jury is still out on this round of earnings (figure 1). As for a macro view, global stock markets tilted higher Wednesday, including a close above 20,000 for Japan’s Nikkei average for the first time in 15 years. It was a narrowly mixed finish for major U.S. stock averages on Tuesday, including lower finishes for the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX), but a modest lift for the NASDAQ Composite (COMP) thanks to biotech gains. Skinny trade is becoming routine, but don’t get caught flat-footed.

FIGURE 1: AREA OF CONGESTION. The S&P 500 (SPX) closed Tuesday just below the closely watched 2100 line as earnings season heats up. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

McDonald’s Has a Plan. The Golden Arch luster may be restored if McDonald’s can succeed with a turnaround announcement set for May 4. This looming calendar event lifted shares early Wednesday even as the rest of an earnings report largely disappointed bulls. MCD revenue matched expectations but same-store sales missed and its profit fall was steeper than Wall Street braced for. MCD’s results follow Coca-Cola (KO), which posted better-than-expected profit and revenue in Q1, an early boost for its shares. Fellow Dow listing Boeing (BA) also beat Street expectations with its Q1 profit, a result driven by strong commercial-jet demand.

Gearing Up for Tech. Facebook (FB) after the closing bell is expected to report Q1 earnings of $0.41 per share according to an average of industry estimates, but attention is likely fixated on its plans to woo younger users.  eBay (EBAY), also due to report, is expected to say Q1 earnings were 70 cents a share. Hard to say if they’ll follow in the footsteps of content stock Angie’s List (ANGI). It’s a strong early gainer after swinging to Q1 profit from the comparable quarter a year earlier. Yahoo (YHOO) for its part failed to excite the Street.

YUM CEO Upbeat. Fast food operator Yum Brands (YUM) was nicked by losing popularity in China but investors may care more about what’s next. The YUM CEO said it’s on track to meet second-half goals and that, for now, was enough for the bulls.

Good trading,
JJ
@TDAJJKinahan

JJ Kinahan

JJ began his career in 1985 as a Chicago Board Options Exchange...

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