Fabulous Friday

Today the market is exploding. As of right now, the S&P 500 is up 1.99%, up on news that Google's ad-click business seems to be unaffected by macroeconomic downturns, Citigroup's earnings report which topped analysts expectations and general positive investor sentiment. Earnings released this week by large banks indicate that losses have no been as large has predicted, and investors are moving back into the market. Not only are financial stocks up, but technology is showing strong growth on the Google news, and also as investors move back into the market, tech stocks will see a lot of this action. Citigroup is up 7.24% and Google is up 21.09% today. The aggregate tech sector is up 2.62%, Financials are up 2.02%, and Capital Goods are seeing the best day by sector, up 2.68%.
Today marks a big day for the market. The market will close today for the weekend. This will mean the market has closed up for the week, showing that investors feel comfortable will sustainable price increases, bucking the trend of volatile and up-down markets. While there may be a sell-off early next week, I see this as a buying opportunity, as I expect the markets to continue to grow from here on.

Earnings Week

The current week is a big one for the Street, as many of the biggest companies release earnings. It's potentially make or break for the health of the market, as stocks have remained stagnant since the S&P jumped 47.48 points April 1st. Since then, the market has lost its gains, but seems to be waiting for news that will either propel prices back up, or slam them back down. This weeks earning announcements seem like the catalyst investors have been waiting for.
The disappointing earnings reported by bellwether General Electric (NYSE:GE) saw stocks plunge on Friday, a sign that investors are keenly watching earnings as a sign of how companies aer performing. Earnings are expected to increase 15.7% in 2008, which is a daunting figure. Earnings in 2007 were supposed to increase 14.5%, and are now thought of to have rose only 2.6%. If companies can't perform as expected, we could be looking at more declines and a continuation of this bear market. However, if earnings are reasonable, investors may be confident enough again to return to stocks, many of which are trading at a huge discount.
While there are many companies reporting this week, there are a few that I feel are the most important company reporting tomorrow, Wednesday April 16th:

• Wells Fargo & Co. (NYSE:WFC) reports Wednesday. The financial institution has been hit by subprime exposure and the overall liquidity crisis. They are the 8th largest member of the Money Center Bank sector, with a Market Cap of 90.9 Billion. Earnings are forecast for $.57 for the quarter, and $2.42 for the current year. 4Q 2007 earnings were $.41, and last years earnings were $2.38. Intraday price as of 2 pm Tuesday April 15 was 27.68, up 1.73% from previous close.
• The Coca-Cola Co. (KYSE:KO) reports Wednesday as well. The beverage producer has seen explosive growth from over seas and a weak dollar has helped exports. Expansion in developing markets, such as China, should have offset the weak economy in the US. KO is doing much better than most stocks, its down .81% in 2008. However, this earnings report will show if the economic contraction at home is cutting into KO's profitability more than expected. Expectations from analysts are $.62 per share.
• JP Morgan Chase Co (NYSE:JPM) reports on Wednesday. The financial giant that recently purchased Bear Sterns Cos at a huge discount has seen its share price sky rocket since the acquisition. However, the buy out could have hurt profits this quarter. JPM is expected to post earnings of $.64 earnings per share. Meeting the expectations could show that JPM did not sacrifice large amounts of money to make the purchase, and position it as the premiere financial company. A miss could be seen by investors as a sign of weakness, though investors might forgive a miss because of the recent Bear Sterns buy out.

Tech Sector Upside

The Technology sector has been battered over the past few months as stocks tumbled and the economic situation deteriorated. The sector is down -12.4% this year. However, before the recent catastrophe, the tech sector was growing quite nicely. In fact, it was up 108.5% since October of 2002. This is second only to the Energy sector. Tech stocks grew an average of 14.63% per year over the past seven odd years. Unlike real estate and some financial stocks, this was not due to irrational exuberance or bubble atmosphere, but on new innovation, higher demand and better productivity. Look at the iPod, the progression of computers, the speed of Internet, Google and HiDef televisions.

So whats changed? Why are tech stocks doing so terribly? Well, I'm not positive. But a lot of it has to do with investor sentiment. Investors leaving the stock market and pulling out of very popular stocks. Many of these are technology sector firms, like Google. This has proved deadly for stocks within the technology sector. Also, there is the real fact that people buy less tech goods during a recession, (do you buy the iPod or the groceries?) However, higher demand from overseas will counteract this to some degree. This can be attributed to the ever growing middle class of India and China, and the weak dollar making our products seem cheaper. Even if some of the price decreases are warranted by decrease demand for technology, I think these stocks still present a unique value buy.

The graph above shows the S&P Technology Sector Index. It shows the massive losses that the sector has experienced over the past year. The sector is down -12.7% in 2008, compared with -6.53% for the S&P at large. For contrast, the Financial Sector is down -8.92% in 2008. This means the tech sector is performing worse than the financial stocks that are right in the middle of the meltdown.

The Tech sector represents a huge value opportunity right now simply because the stocks have been beaten so low. Like financial stocks, these companies are trading at fractions of what they were a year ago. However, unlike financials, they have no real flaws behind them. These companies are not going anywhere, and if your willing to wait for a little bit, they will yield HUGE returns in the coming months.

Top Tech Stocks

Google Inc. (NASDAQ:GOOG)
-Market Cap: 146.60 Billion
-current year forward (CYF) P/E: 23.97
-CYF PEG: .9374
-52 wk HIGH/LOW/CHANGE: 747.24/412.11/-.78%
-YTD HIGH/LOW/CHANGE: 691.48/412.11/-32.35%

Apple Inc. (NASDAQ: AAPL)
-Market Cap: 143.33 Billion
-CYF P/E: 29.68
-CYF PEG: .957
-52 wk HIGH/LOW/CHANGE: 202.96/80.60/61.43%
-YTD HIGH/LOW/CHANGE: 198.08/119.46/-22.84$

Microsoft Corp. (NASDAQ: MSFT)
-Market Cap: 267.58 Billion
-CYF P/E: 15.37
-CYF PEG: .603
-52 wk HIGH/LOW/CHANGE: 37.50/26.87/.7%
-YTD HIGH/LOW/CHANGE: 35.60/26.87/-19.24%

Cisco Systems Inc. (NASDAQ: CSCO)
-Market Cap: 142.81 Billion
-CYF P/E: 15.56
-CYF PEG: 1.044
-52 wk HIGH/LOW/CHANGE: 34.24/21.77/-1.12%
-YTD HIGH/LOW/CHANGE: 27.07/21.77/-11.49%

Tommorow Big Day for Stocks

Today the market surrrrged. The Dow Jones (DJIA) was up 391.47 points or 3.19% to 12,654.36. The NASDAQ was up 83.65 (3.67%) to 2,362.75, and the S&P 500 was up 47.48 points, 3.59% to 1370.18. Woah. Lots of numbers. Better yet, lots of green numbers. Let me summarize: the markets did work today.
However, if we're ever going to get out of the current slump, which I think we should and will do, the market is going to have to string together consecutive days of good performance. The market looks like it may be at a bottom, but if it just goes back down, were still stuck in our rut. Look at the S&P graph from Google Finance (.INX) to see what I mean.

While I'm no technician (some one who uses graphs and charts to predict the market) I do believe that using technicals can help predict how markets will perform. Looking at this chart shows me that over the past 3 months, in which the market lost 6.69%, there have been distinct support and resistance values for the S&P. You can see the 4 peaks, labelled ABCD, and the downward resistance line they create. You can also see the support line, created by the troughs EFG. Today broke this resistance. While this isn't enough to make market calls, it does show investor sentiment rose a notable amount, as prices broke trends that were keeping them in a downward spiral. Also, news from the Treasury, the extension of Fed's auction window to investment institutions, stimulus package on the way and rallying international markets make me hopeful.
The patterns here are very similar to those of the NASDAQ and the DJIA . (Check out Google Finance for their graphs.) Another thing I find promising about the charts is that one, the S&P was following a distinct trend before 2008 as well. And two, the last time the S&P broke trend, it broke support, and the market began a larger downward trend. (See above graph, the trend lines should be pretty apparent.) Now that it has broken trend again, and this time by breaking resistance, I'm hopeful we'll see an upward trend.

I'm looking at tomorrow as a sort of Grounds-Hog Day. If the market comes out, sees its shadow and dives 2%, we may be back in the rut and today was a fluke. But if we can keep this growth, and add new growth over the coming days without any unexpected bad news, I think we may have weathered the storm. Let's hope for the best.