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Stocks Tick Up After Goldman Earnings Soar, But Key Economic Indicator Shows Consumer Worries

Stocks Tick Up After Goldman Earnings Soar, But Key Economic Indicator Shows Consumer Worries

Topline

Stocks barely budged Wednesday morning after a mixed bag of pre-market earnings results revealed that the economic recovery is still suffering from weak fundamentals.

Key Facts

As of 9:35 a.m., the Dow Jones Industrial Average had edged up .1%, while the S&P 500 and the tech-heavy Nasdaq ticked up .2% and .5%, respectively.

Shares of Goldman Sachs climbed 1% after the New York-based investment banking giant reported $3.5 billion in profits and a 30% surge in revenue fueled by the mid-pandemic trading boom. 

Bank of America, on the other hand, failed to impress investors, posting mixed results for the third quarter that beat analysts expectations on profits, which totaled $4.9 billion, but fell behind on revenue expectations; its shares are down nearly 3%.

Wells Fargo shares are down 3% after reporting a 56% drop in quarterly earnings due to decreased interest income in light of historically low interest rates, the firm said.

Global markets were also fairly tepid on Wednesday: As of market open, the United Kingdom’s FTSE 100 had fallen .4%, and France’s CAC 40 was virtually flat, while Japan’s Nikkei 225 ended Wednesday up just .1%.

The consumer price index for September–a key measure of inflation–came in slightly below expectations, rising .19% during the month and leading to an unchanged year-over-year rate of 1.7%.

Key Background

The Covid-19 pandemic threw the economy into a deep recession, and Federal Reserve Vice Chairman Richard Clarida said Wednesday morning that the U.S. economy needs another year–or maybe more–until it fully recovers. The recovery thus far has been marked by slowed job growth, layoffs that remain high and a volatile stock market that’s been rocked in recent weeks by mounting uncertainty around

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A 100-year-old stock indicator just flashed a bullish signal suggesting further market upside

A 100-year-old stock indicator just flashed a bullish signal suggesting further market upside

A trader works on the floor at the New York Stock Exchange (NYSE) in New York, U.S., March 4, 2020. REUTERS/Brendan McDermid
  • The Dow theory — a financial theory named after the father of technical analysis, Charles Dow — just flashed a bullish signal suggesting more upside ahead for the broader stock market.
  • The theory is based on the relative price action of the Dow Jones industrial average and the Dow Jones transportation average, as traders look for a move in one to be confirmed by a move in the other.
  • On Wednesday, the Dow Jones transportation average closed at a record high. The theory would suggest that the Dow Jones industrial average will soon follow.
  • Visit Business Insider’s homepage for more stories.

Following the death of Charles Dow in 1902, hundreds of his editorials published in The Wall Street Journal (which he founded) were compiled and expanded on, giving rise to “Dow theory.”

Coined by S. A. Nelson and refined by William Hamilton and Robert Rhea, Dow theory is the study of the intermarket relationship between the Dow Jones industrial average and the Dow Jones rail average, now called the transportation average.

The general idea is that both averages, over time, should move in tandem, given that the transportation average represents companies responsible for the movement of goods across the country. For that reason, it should serve as a leading indicator.

Read more: Self-taught market wizard Richard Dennis took a $1600 loan and turned it into an estimated $200 million. He shares the 13 trading rules that turned his performance parabolic.

Put differently, both depend on each other: If the economy is thriving, transportation companies should also be thriving, as they are tasked with literally moving the economy.

Technical analysts look to Dow theory to confirm broad movements in the stock market. Specifically, traders look for confirmations and divergences between the two indexes.

A confirmation is when the transportation

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