Equity markets in North America have retreated somewhat this morning, in what appears to be a combination of profit-taking off of yesterday’s rally and mixed reactions to a plethora of US earnings reports as their reporting season kicks into full gear.

In addition to earnings news, there have been a number of economic releases today. In the US, data was mixed, the April Philadelphia Fed reading came in at (24.9), down from (17.4) in March and below the (15) Street estimate. Meanwhile, the March Leading indicator was up 0.1%, as expected, and jobless claims of 372,000 was slightly better than expected. In Canada, meanwhile, the Consumer Price Index for March was up 1.4% over a year ago, the fourth straight month inflation has declined and the lowest rate since January 2007. With inflation pressures easing here, the Bank of Canada may have room to lower interest rates if needed in the coming months.

What does appear as significant about this action for the moment, however, is that indices continue to trade well above the levels where yesterday’s late day rally started, continuing the formation of bullish ascending triangle patterns and indicating that bulls may be gaining confidence. The key test that indices now seem to be facing is if they can get through key channel resistance levels such as 12,800 for the Dow Industrials (US30 CFD), 1,400 for the S&P 500 (SPX500 CFD), 1,875 for the NASDAQ 100 (NDAQ100 CFD), and 850 for the S&P/TSX 60 (Toronto60 CFD).   

Energy commodities, meanwhile, continue to advance, with crude oil holding above $115/bbl and natural gas climbing toward a test of resistance near $10.50/mcf. Copper has attracted significant new interest today, rising nearly 3.5% toward another test of its key $4.00/lb resistance level.  

Canadian share update: uranium sector recovers

A number of uranium producers have been among the leading advancers in Canada this morning. Denison Mines (TSX: T.DML, Bullboard) has advanced 4.7% today, after entering into a definitive agreement with Bluerock Resources (TSX: V.BRD, Bullboard) to mill 60,000 tons of uranium ore this year, and 100,000 tons per year in 2009 and 2010 from projects in Colorado and Utah. Meanwhile, Cameco (TSX: T.CCO, Bullboard) has been able to shrug off rising capital costs at the Bruce Nuclear Facility to advance 3.2%, and Uranium One (TSX: T.UUU, Bullboard) has moved up 4.0%.

Thomson (TSX: T.TOC, Bullboard) declined by 2.2% this morning after announcing overnight that it has completed its merger transaction with Reuters.

The energy service sector also appears to be attracting increased interest with Enerflex (TSX: T.EFX, Bullboard) up 3.6%, Newalta (TSX: T.NAL, Bullboard) up 3.0%, and Precision Drilling (TSX: T.PD, Bullboard) up 2.4%.  

US share update: reaction to earnings reports and guidance dominates trading

International Game Tech (NYSE: IGT, Bullboard) has dropped 8.5% in early trading today after reporting that it earned 28 cents per share in Q1 F2008 on revenue of $573 million, well short of the Street estimates of 34 cents and $621 million, respectively. The company also indicated that it expects EPS to remain in the 35–40 cents range for at least the next four quarters.

A number of regional banks have declined this morning after posting results that came in below expectations. For example, First Horizon National (NYSE: FHN, Bullboard) reported EPS of six cents, below the 11 cents Street estimate. Loan loss provisions increased to $240 million from $156 million. PNC Bank (NYSE: PNC, Bullboard) reported EPS of $1.09, below the $1.15 expected. KeyCorp (NYSE: KEY, Bullboard) earned 26 cents, below the 33 cents anticipated. In response to these results, First Horizon has dropped 2.6%, KeyCorp has fallen 3.7%, and PNC has declined 1.8%.

Nucor (NYSE: NUE, Bullboard) has rebounded from some initial softness, rising 3.7%. The steelmaker reported EPS of $1.41 for Q1 F2008, well above the $1.33 Street estimate. Results were boosted by a 5% increase in shipments over the year and a 15% increase in steel prices. For Q2 F2008, the company released EPS guidance of $1.55–$1.60, below the $1.70 previous market estimate.

Student lender SLM Corp. (NYSE: SLM, Bullboard) has gained 7.5% today after reporting core EPS of 48 cents for Q1 F2008, beating the 38 cents Street estimate, as loan originations increased by nearly 10% to $8.7 billion. Management suggested, however, that financial market conditions remain difficult.

In another sign that sentiment toward the financial service sector may be changing, CIT Group (NYSE: CIT, Bullboard) has been able to shrug off disappointing results and advance 3.5% today. CIT lost $1.35 per share last quarter, well below the 30 cents profit investors had been expecting. CIT also slashed its quarterly dividend to 10 cents from 25 cents. With this rally, CIT appears to have completed a double bottom near $10.00 and may be starting to build a base in the $10.00 to $15.00 range.

This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision. 

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