American Express Scares Shorts

Fundamental Take:
Stocks gained 109 in a late-day rally as American Express sparked buying interest. AXP reported late in the day that its net charge-off rate rose a minor 0.2% from 8.6% to 8.8% from February to March. AXP shares vaulted 11.9% for the day with most of the gains coming in the last two hours of trading after the report was released. Investors were encouraged that the default rate has slowed signaling increased resilience in America's higher end consumers. The Fed's Beige Book release at 2 PM further fueled buying indicating a slowdown in the economic downturn. Markets started the day lower after Intel disappointed the Street after the close yesterday offering cautious guidance. While Intel's earnings per share more-than-tripled expectations coming in at 11 cents per share, the giant chip maker said it expects sales to be flat in the second quarter. Intel declined 2.4% causing the Nasdaq to lag the other major indexes for the day.

Technical Take:
Stocks gyrated back and forth throughout the session before making a decisive move higher into the close in the last hour of trading. The Dow rose over 100 points from flat in the final hour as AXP motivated a small short-covering move higher. The Dow is oscillating around the 8,000 level as earnings reports begin to provide investors clarity on the US economic recovery. Expectations have been discounted enough now that most companies as of late have been able to beat expectations and find upside in their shares. Consolidation is the name of the game right now as earnings flow in and traders wait to see what others are going to do. Will we make a strong move through 8,000 and continue trending higher or are we destined for a retest of the lows? Given the strength of the bid in the market, I would expect the former but I will let stocks digest their gains and base for now.