US stock futures are giving back overnight gains and now point to a slightly down open Wednesday after the market stalled out near resistance yesterday. Oil prices continue to surge to around $105 a barrel over unrest and escalating conflicts in the Middle East. The battle in Libya rages on, and unrest in Yemen is heating up with a scheduled Friday rally being called “Friday of the March Forward”. Japan’s Nikkei closed down 1.6% overnight, accelerating to the downside in the final hour of trading after higher-than-allowed radioactive iodine levels were found in Tokyo drinking water. The nuclear crisis has stabilized somewhat, but the Fukushima Daiichi reactors remain overheated and permanent cooling mechanisms have not yet been restored. Also, Egypt’s stock market reopened for trading after nearly two months of being closed, and stocks quickly plummeted, setting off circuit breakers.
On the earnings front, Adobe Systems Inc. (ADBE) reported an 85% rise in Q1 profits after the close yesterday, but lowered second quarter revenue guidance after the Japanese earthquake. The stock is trading marginally higher this morning as the two component of the report seemingly canceled each other out in the minds of investors. ADBE could see heavy trading volume today, so it is one to watch. Notable reports upcoming on the earnings calendar include Research in Motion, Limited (RIMM) on Thursday. RIMM’s PlayBook tablet is on pre-order, and it will be interesting to see how well the company can compete in the tablet computing market. Apple Inc. (AAPL)’s iPad 2 is set to debut in 25 countries and remains the firm leader in the sector. Oracle Corporation (ORCL) and Accenture Plc (ACN) are also set to report Thursday.
For more market and stock commentary, watch T3Live.com’s Morning Call with Scott Redler and Alix Steel, below.
Indices
In terms of the indices, it is hard to be too aggressive after the multi-day bounce that stalled out yesterday. The market has recovered much of its losses resulting from the Japanese earthquake and subsequent nuclear crisis, so the market could spin its tires a bit trying to surge through the 21 and 50-day moving averages. If the market can push higher from this level, the next test will be a challenge of the breakdown level from the wedge pattern.
Rare Earth
The story of the market yesterday was the rare earth sector, which exploded after comments from the Molycorp, Inc. (MCP) CEO that selling prices were increasing for rare earth materials. Molycorp closed nearly 18% higher after being out of play for the better part of two-and-a-half months, but the biggest gainer was China Shen Zhou Mining & Resources (SHZ), which surged nearly 29%! After such a massive run that squeezed a lot of shorts, the rare earth sector will probably need to rest for a few days. However, yesterday’s pop could bring the group back in play for active traders.
Continue to Watch Freeport-McMoRan
Yesterday we highlighted Freeport-McMoRan Copper & Gold Inc. (FCX) as a stock to watch if the market can get a bid. Despite being in a two month downtrend, FCX held up fairly well when the market was getting hit last week, and was one of the first and strongest stocks on the bounce. The relative strength of FCX gives us confidence it could lead the market during the next leg higher. The stock is now consolidating after poking its head out of the upper trendline of its descending channel. This morning FCX is opening higher, and it should get more upside continuation during the session.
Tech
Select tech stocks have once again started to show some leadership in this market, a positive sign. Among those resurgent leaders is Baidu.com, Inc. (BIDU), which broke higher after more than a month of consolidation and should be back to new highs above the $131 area in the next few weeks. Other China names to watch are SINA Corporation (SINA), which is set to test highs, and Sohu.com Inc. (SOHU), which should wake up after a recent pull back. Apple Inc. (AAPL) continues to work through issues with its supply chain in Japan and concerns over Steve Jobs’ health, and couldn’t hold solid pre-market gains yesterday. Amazon.com, Inc. (AMZN) remains firmly in a downtrend after putting in a double-top above $190 back in mid-February. Although AMZN has yet to break out of that downtrend, we will be watching it closely as it could provide an outstanding risk-reward trade when it does perk up.
With problems on-going in foreign markets, it will likely be hard for the market to blast-off from this level. Active traders have been somewhat frustrated by the lack of volatility during the session over the past several days, as most of the action has taken place overnight. Be patient and cautious at these levels, and wait for more confirmation before aggressively entering trades in either direction.
*DISCLOSURE: Scott Redler is long BIDU, BAC, FCX, GLD, F, LEI, SLV, NYX.
This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by T3 LIVE or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs. Visit the T3Live Homepage, Virtual Trading Floor, and Learn More About Us.
