Stocks registered a slight loss Monday following a six-session winning streak. The CBOE Volatility Index (VIX) fell to its lowest level since 2007, and volume was the ninth lowest of the year. Gold futures were up 0.1%, their fourth straight gain.
For the 46th straight session, the S&P 500 closed with a move of less than 1%. Nevertheless, the index has recorded 22 record highs this year and is up 6.2% in 2014, marking this the bull market everyone loves to hate.
The National Association of Realtors reported that existing home sales increased 4.9% to a seasonally adjusted annual rate of 4.89 million units in May versus expectations of 4.75 million.
MICROS Systems (MCRS) rose 3.4% following a Wall Street Journal report that Oracle (ORCL) is close to a deal to buy the software company for $5.3 billion. And Integrys Energy (TEG) jumped 12.1% after it was announced it would be purchased by Wisconsin Energy (WEC).
At Monday’s close, the Dow Jones Industrial Average was down 10 points to 16,937, the S&P fell less than a point to 1,963, and the Nasdaq rose less than a point to 4,369. The NYSE traded total volume of 2.7 billion shares, and the Nasdaq crossed 1.7 billion shares. Advancers and decliners broke even on the Big Board, but on the Nasdaq, decliners were ahead by 1.3-to-1.
The stock market, as measured by the performance of the S&P 500, has been in a bull market since March 2009. This makes it one of the longest bull markets on record, thus some of our readers question how much longer prices can head higher.
That question assumes that we have been operating in a “normal” economic environment, which we have not. And so the real question should not be how much time is left in the bull, but how far can he run?
Even on the best of days the major indices have been slugging it out one inch at a time. This is because earnings have been improving but at a slow rate supported by accommodative policies from the Fed. So the answer is: As long as the Fed continues to prop up the market, the market will respond positively. It’s the old story of “don’t fight the Fed.”
Conclusion: As for a target, in January, I said that I felt the S&P 500 could reach 2,200 sometime this year, and later I targeted the Dow at 17,779. That’s aggressive and assumes a P/E multiple for each index of over 20 times earnings.
But past bull markets have topped at around 22 times earnings without a push from the Fed. And most important, with interest rates on the 10-year bond at just 2.6%, bonds offer little in the way of return. Money always flows to the asset that treats it best, and for now, that is the U.S. stock 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.