Financial stocks led the markets higher yesterday despite economic reports that were slightly disappointing. But one report, from the Labor Department, showed that initial jobless claims fell slightly last week, and the four-week average of claims fell to its lowest level in nearly four years.
About 30 minutes before the close, a report of an explosion at a major Saudi pipeline sent the Dow into a 50-point plunge. But when the Saudis denied the report, the Dow bounced back to close on the positive side.
At the close, the Dow Jones Industrial Average rose 28 points to 12,980, the S&P 500 gained 8 points at 1,374, and the Nasdaq was up 22 points at 2,989. The NYSE traded 814 million shares, and the Nasdaq crossed 514 million. On the Big Board, advancers were ahead of decliners by 2-to-1, and on the Nasdaq, advancers led by 1.3-to-1.
February, which is usually a down month following a strong January, defied historical data and rose over 4%. That rise took the S&P 500 to a new high for the year at 1,378. And more importantly, it put into view the May 2008 high at 1,440, which is about 4.8% higher than yesterday’s close.
Group rotation is a hallmark of a strong market advance. And lately we couldn’t ask for more — one day the aggressive stocks, techs and banks, and then the more defensive stocks like pharmas and utilities make their move. But the most undervalued group, and the one met with the most skepticism — the financials, and especially the banks — could have the best potential for a big advance.
Note the new high made by the Financial Select Sector SPDR (NYSE:XLF) yesterday. And against conventional analysis, the MACD is about to render a new buy signal — even though it is in bearish territory. Buy banks, the sleepers of the bull market.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.