The bulls regained their footing on Wednesday, thanks to the Fed, as hearing yesterday’s Beige Book report confirmed things aren’t all that rosy with the US economy which lead to speculation that another round of quantitative easing (QE2) from the central bank could be bigger than expected. Although economic activity continued to rise, albeit at a modest pace, from September to early October, the talk of more QE2 weakened the dollar and the market soared.
The dollar’s drop of 1.3% yesterday followed the nearly 1.7% gain it made on Tuesday and whichever way the dollar goes (for now) the market will go in the other direction.
As a result, the Dow surged triple-digits or 129 points and easily finished above the 11,000 level, at 11,107. Bank of America (BAC, $11.75, down $11.75, down $0.05), a member of the index, fell to a fresh 52-week low of $11.17 and could be headed below $10. There is a lot of headline risk with this stock right now and if it gets to single-digits, we will buy some LEAP options, for sure. Our near-term targets remain 11,150-11,200 for the Dow and another “breakout” could occur if resistance is broken.
The S&P 500 closed back inside our 1,175-1,200 zone by adding 12 points, or 1.1%, to settle at 1,178 while the Nasdaq added 20 points, or 0.8%, and went out at 2,457. Overhead resistance remains in the 2,300 area for Tech.
Turning to earnings, Netflix (NFLX, $153.15, up $3.82) could do battle with its 52-week high of $175 today. Shares surged 7% after the closing bell yesterday when the company reported quarterly results.
The company reported a profit of $38 million, or $0.70 a share, versus $30 million or $0.52 a share in the same quarter last year. Excluding one-time items, Netflix actually earned $0.78 a share, which was better than Wall Street’s expectations for a profit of $0.71 a share.
As far as revenues, the online movie giant experienced said sales surged over 30% to $553 million, up from $423 million last year, and ahead of calls for $551 million.
Although the company “officially” missed earnings by a penny, investors clearly overlooked the fact and instead saw strength in the number of new subscribers they are signing up. Netflix is going global and their business is only getting stronger.
The company said it added 1.9 million new users for the quarter, bringing its subscriber base to a hair below 17 million, up over 50%from the same time last year. Looking ahead, Netflix sharply raised its 4Q subscriber guidance from 17.7-18.5 million to 19-19.7 million.
Better yet, Netflix also raised its earnings and sales guidance for the current quarter to $0.59-$0.74 a share, on expected revenue of $586-$598 million.
Shares are at $165.85, up $16.70, in pre-market action this morning.
As we head to press, Dow futures are up 28 ticks while the S&P 500 futures are higher by 4 points. The Nasdaq 100 futures are advancing by 10 points. We have a lot to cover in our Members Area this morning so let’s get on it.