WEDNESDAY 7/23/14; DOW; BA; GSK; SPX and TRAN New All-Time Highs; FB; GILD; T; QCOM

The dollar/yen drifts lower to 101.37 so the stronger yen sends the NIKK lower. Asian indexes trade mixed. Japan and Mongolia reach a trade agreement removing tariffs on each other’s products. Typhoon Matmo wreaks havoc killing 56  in mainland China and hitting Taiwan next. Korean chip makers are weak with LG Display down -3%. Cracks continue to form in the high-flying semiconductor sector. In Indonesia, Joko Widodo, the reformer candidate, is declared the victor in the presidential race and the Jakarta Composite rises +0.5%. Data feeds for Indonesian stocks are interrupted. Widodo’s opponent vows to fight the election results in the constitutional court claiming wide spread fraud.

China’s Huatong Road and Bridge must make a debt payment today to avoid default but there is no news on whether or not this occurred. Haitong Securities trades +2% higher so perhaps the situation was swept under the rug. China indexes trade higher on stronger moves in financial companies. The Aussie market continues higher with SPASX200 printing another six-year high. Aussie Dollar 0.9443.

Russia’s Micex Index trades +0.5% higher and was up +1% earlier. Sanctions, schmanctions. The weak response by the West concerning further sanctions sends global stock markets into rally mode.

The suspension of flights into Israel creates temporary airport chaos. Terrorists will likely target commercial airlines moving forward noting the fear generated by the MH17 crash and the suspension of flights to Israel. Fear is a terrorist’s currency. The TWA Flight 800 crash in New York in 1996 was likely shot down by a missile but this was swept under the rug after an investigation. Numerous eye witnesses saw the missile run from the ground up into the night sky exploding the airplane but the authorities blame a faulty fuel tank and electrical wiring. If you plan to fly, make sure your life insurance is paid up. A LUV jet makes an emergency landing in Austin, Texas, this morning due to smoke in the cockpit. There are no injuries.

Europe trades higher. Italy’s MIB is negative. Euro 1.3466. The BOE Minutes show a unanimous 9-0 vote for no rate action at the last meeting. The members indicate that activity in the UK housing market is slowing. The BOE is concerned over the lack of rising wages. This is the identical situation as the States. Wages are not rising. Inflation cannot exist without wages increasing. A lack of inflation indicates that the Fed and other central banker multi-year obscene Keynesian policies are failing; an outcome very few expect, or want to face. Pound 1.7076.

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The trading day begins with mixed signals and equities stumbling sideways. VIX collapses to 11.49 creating market lift. R, DOW, GD and NSC all beat on earnings which creates a positive mood. BA reverses earlier happiness descending -1.9% creating a drag on the Dow. Boeing says their backlog may drop and the forward cash flow guidance is not raised hurting the stock. New regulations are imposed on the railroads due to the recent train accidents and chemical and oil spills. Rail stocks such as CP, NSC, CSX, CNI trade lower across the board.

MCD is downgraded and drops -0.5%. WHR collapses -5% after missing on earnings and lowering full-year guidance. Whirlpool says China and global sales are weak but US sales are steady. WHR is an important indicator for the housing sector and the results are not encouraging. People do not buy appliances if they are not buying homes. Equities stumble sideways during the session and end mixed.

The SPX is up 3 points, +0.2%, printing a new all-time intraday high at 1989.23 and new all-time closing high at 1987.01; the 26th record high this year. TRAN prints new all-time highs above 8468. The INDU loses -27 points, -0.2%, to 17087. BA loses -2.3% dragging the Dow lower accounting for about 25 negative Dow points today. The COMPQ gains 18 points, +0.4%, to 4474, continuing to print at 14-year highs. The RUT gains 2 points, +0.2%, to 1158 using support of the 50-day MA at 1155 and 150-day MA at 1153. Traders do not care that 100 people are dying per day in Israel and Gaza as well as other geopolitical turmoil since the Fed will keep pumping the stock market higher with easy money. Party on.

The biotech sector is strong with IBB gaining +2.2%. PBYI blasts off up +270% on encouraging breast cancer drug results. Traders are chasing into tech stocks with the tech sector now accounting for about 19% of the weighting in the S&P 500. XLK rallies from 35 to 40 in three month’s time; +14%. AAPL and MSFT drive much of the upside up +33% and +15%, respectively, over the last three months. Markets typically top when a smaller and smaller selective group of stocks continue to push indexes higher.

After the closing bell, Facebook earnings show a doubling of profit with the mobile ad business running on all cylinders. EPS beats handily but top line sales are only in line. FB explodes +5% higher printing new record highs. GILD reports strong results boosted by its Hep C drug Sovaldi but trades flat. ANGI misses earnings estimates and is beaten -24%. TRIP loses -11% after reporting higher sales and marketing costs.

The US wireless provider T drops -1.1% after missing on both top and bottom lines. AT & T reports a -7% drop in profits. QCOM beats earnings estimates but lowers profit forecasts. China anti-trust regulators label Qualcomm as a monopoly creating significant challenges ahead. QCOM collapses -5%. SKX kicks higher on robust footwear earnings.

A Wells Notice is issued to MHFI (S&P ratings agency division) concerning six CMBS deals that were graded in 2011. The financial crisis in 2008 was exacerbated by the rating agencies labeling commercial-mortgage backed securities as triple A paper when in fact the instruments contained high-risk loans. Investors buy based on ratings so these investments were exposed to far more risk than expected. McGraw Hill Financial is fully cooperating with the SEC to resolve the matter.