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Earnings Optimism Helps S&P 500 Index to Fifth Straight Win

Gold continues to pull back, while oil edges to a seven-week high

by 4/21/2014 4:17:20 PM
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"After last week's rally, it was nice to see the bulls defend their turf and not give back any of the gains," noted Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. "News was light, and so were earnings. It seemed like more a buyers' strike than anything. Still, earnings season hits hard this week, so don't expect too many more slow and boring days like this one." The Dow Jones Industrial Average (DJI) traded in a tight range but finished with a modest gain, bouncing back from Friday's slight pullback. The S&P 500 Index (SPX), meanwhile, extended its longest winning streak since October.

Continue reading for more on today's market, including:

  • In a battle of social networking giants Facebook Inc (NASDAQ:FB) and LinkedIn Corp (NYSE:LNKD), which name looks like the better bet?
  • Judging from the recent price action in the CBOE Volatility Index (VIX), Schaeffer's contributor Adam Warner says a market turn "sure feels like it's about to happen."
  • Micron Technology, Inc. (NASDAQ:MU) option bulls are betting on a move to multi-year highs this summer.
  • Plus ... Leading indicators come in better than expected, tensions in Ukraine escalate, and Advanced Micro Devices, Inc. (NYSE:AMD) collects post-earnings votes of confidence.
Trading Topic of the Week -- 5 Reasons to Dodge Directional Risk: Increase the odds of a winning trade. All other things being equal, a straddle is more likely to end up a winner than an at-the-money call or put -- the strategy boasts a 42% win rate, compared to roughly 34% for a directional play.

The Dow Jones Industrial Average (DJI - 16,449.25) spent most of the session flirting with modest gains, ultimately settling 40.7 points, or 0.3%, higher. Acquisition-related rumors helped Pfizer Inc. (NYSE:PFE) lead the 17 advancing blue chips, adding 2%. The Walt Disney Company (NYSE:DIS) and UnitedHealth Group Inc. (NYSE:UNH) both lost 1.1% to pace the declining minority.

The S&P 500 Index (SPX - 1,871.89) finished higher for the fifth straight session, tacking on 7 points, or 0.4%. Meanwhile, the tech-rich Nasdaq Composite (COMP - 4,121.55) fared the best of its peers, advancing 26 points, or 0.6%, to notch its fifth consecutive win.

The CBOE Volatility Index (VIX - 13.25) started off strong, but backpedaled into the red in afternoon trading. By the close, the market's "fear barometer" shed 0.1 point, or 0.8%.



A Trader's Take:

"Earnings season has fit the bill once again," added Detrick. "Most names to report have beaten the lowered bar. That is pretty much par for the course anymore, though. What could have much more of a market-moving impact is if names start to miss the lowered bar. I'm not saying that will happen, but should it start to transpire, a big move lower could result."

5 Items on Our Radar Today:

  1. M&A rumors hit the pharmaceutical sector, as Pfizer Inc. (NYSE:PFE) is reportedly back in the hunt to acquire AstraZeneca plc (ADR) (NYSE:AZN), despite a previously rejected $101 billion bid. Sources suggest PFE has its eye on AstraZeneca's line of immunotherapies -- experimental drugs that help bolster a patient's immune system to fight cancerous tumors. (Reuters)
  2. The Conference Board reported its index of leading indicators rose 0.8% last month, exceeding economists' expectations. This was the best monthly result since November, and was a further indication that the U.S. economy is showing signs of life after a winter-weather-spurred slowdown. (Associated Press, via CNBC)
  3. A truce signed between Ukraine and Russia (with aid from the U.S. and European Union) didn't last long, as at least three people were killed during a shootout at an eastern Ukraine checkpoint manned by pro-Russian separatists. Russia and Ukraine officials pointed fingers at the other for instigating the incident. (FOX News)
  4. On the heels of Thursday's first-quarter earnings report and forward-looking guidance, Advanced Micro Devices, Inc. (NYSE:AMD) surged higher in today's trading and earned positive coverage on Wall Street.
  5. Earnings on Deck: What the landscape looks like for AT&T Inc. (NYSE:T) and Cree, Inc. (NASDAQ:CREE) ahead of tomorrow evening's quarterly reports.

For a look at today's options movers and commodities activity, head to page 2.

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