U.S. stock indexes accelerated on a bullish path Tuesday as the market began the day’s final hour of trade. Meanwhile, Goldman Sachs (GS) and Apple (AAPL) signaled what is wrong and right with the market.
The Nasdaq galloped 1.8% higher, while S&P 500 and the Dow Jones industrial average popped 1.1% and 0.9%, respectively.
Small caps kept to the chase, as the Russell 2000 added 0.8% in another bullish showing.
Volume picked up in the afternoon as Nasdaq and NYSE both showed slightly higher volume compared with the same time Monday.
Two Banks Join The Shrug Club
Goldman Sachs became the latest big bank to report strong quarterly results and then shrug off the performance. Goldman’s earnings came in well above estimates. But the stock reversed to a 2% loss in heavy volume.
Dallas-based Comerica (CMA) reported a 51% increase in earnings, edging above the consensus estimate by a penny. The narrow beat earned a slap in the face as the superregional stock fell 3.5%.
The banks recently have shown that the most dangerous thing for them is to beat earnings estimates.
Besides topping earnings expectations by about 25%, Goldman boosted its dividend by 5 cents to 80 cents a share.
Why the trouble among banks and their earnings beats? Uncertainty surrounds the proposed changes to the Dodd-Frank law. Banks don’t like the Dodd-Frank regulations, but the Republicans have not been able to unite on a plan to either repeal or amend the law.
The selling in bank stocks could be profit taking, given the run-ups many banks enjoyed in 2017.
Apple Shows What’s Right
Meanwhile, Apple is showing that no news can be good news. Apple rose 1.5% as it headed for its ninth gain in 11 sessions. This was accomplished without an earnings report.
Apple will report quarterly results May 1 after the close. The stock is only 3% off its high, forming a base with a 183.60 buy point.
Analysts expect Apple’s quarterly earnings to jump 29% to $2.70 a share. A 29% gain would be Apple’s best in 10 quarters.
Resistance Is Broken
The 50-day line has been a problem since mid- to late March for the Nasdaq and the S&P 500. The indexes broke above the 50-day line Tuesday morning but the test will come at the close.
A close above the line would help validate the market’s uptrend.
If the indexes were to convert the 50-day line from resistance into support, the next resistance area would be at the 7500 price level for the Nasdaq and the 2800 area for the S&P 500.
Apart from those technical tests, the market is still vulnerable to news events. China announced Tuesday that it would slap a tariff on U.S. sorghum imports. The move followed the U.S. decision Monday to ban U.S. firms from selling parts to Chinese phone maker ZTE Corps for seven years.
The U.S. Commerce Department said ZTE violated an agreement when it shipped U.S. goods to Iran.
Cloud security provider Qualys (QLYS) broke out of a flat base in twice its usual volume. The stock surged 5.5% to clear a 79.50 buy point in a flat base. The pattern, though, is late stage.
Chemical products maker Celanese (CE) gapped up 3.5%. The stock broke above a 109.35 buy point in a double-bottom base. A double-bottom base is shaped like the letter W. The middle peak is the buy point.
Netflix’s gain came after reporting results and strong subscriber growth late Monday.
Among IBD’s 197 industry groups, the day’s best performers were mostly tech-oriented groups. The biggest losers included tobacco, meat and soap — the defensive areas.
Coming Up Wednesday
The Federal Reserve’s Beige Book report for March will be released Wednesday at 2 p.m. ET, according to Econoday.