U.S. equities finished with modest gains on Tuesday after overnight and early-session weakness on headlines that a Russian fighter bomber was shot down in northern Syria by a Turkish F-16 after violating Turkey’s airspace. Given that Turkey is a NATO member, fears flared but then subsided after officials urged escalation and calm.
Moscow tasked a guided missile cruiser to provide air support to its air campaign and said all bombing missions will now feature fighter escorts.
In the end, the Dow Jones Industrial Average gained 0.1%, the S&P 500 gained 0.1%, the Nasdaq went up a fraction and the Russell 2000 gained 0.7%. Treasury bonds were mixed, the dollar was weaker and commodities enjoyed a bounce. Crude oil gained 2.7% to close at $42.88 a barrel. Gold gained 0.7%. And copper climbed as well.
Possible short-covering added to the positive momentum in commodities with the latest Bank of America Merrill Lynch Global Fund Manager Survey showing allocation to the asset class unchanged at a net 23% underweight — 1.3 standard deviations below the long-term average.
Thanks to the rise in oil, energy stocks led the way with a 2.2% gain followed by materials, which rose 0.8%. Edge subscribers enjoyed a surge in their collection of gold and silver stocks including a 10.9% rise in Kinross Gold Corporation (USA) (NYSE:KGC). Overall, the Market Vectors Gold Miners ETF (NYSE:ARCA:GDX) gained 3.8%.
Financials were the laggards, falling 0.3%, with Bank of America Corp. (NYSE:BAC) testing below its 20-day moving average for the first time since early October in what looks like the beginning of the end of its recent two-month uptrend. BAC stalled out near its July-August high as concerns about net interest margins resurface (long-term yields could drift lower if a possible December Federal Reserve interest rate hike is considered by the market to be a policy mistake given low inflation).
In response, I have recommended the $17.50 December BAC puts to Edge Pro subscribers.
And despite the afternoon rebound in stocks, investors were still cautious with the CBOE Volatility Index (VIX) gaining 1.3% for its first two-day gain in two weeks.
In earnings news, Tiffany & Co. (NYSE:TIF) rose 3.6% after an earnings miss and reduced guidance as analysts were prepared for issues from a strong dollar and a drop in tourism activity. Burlington Stores Inc (NYSE:BURL) gained 7.2% thanks to an earnings per share beat on a 2.8% jump in comp-store sales.
On the economic front, real Q3 GDP was revised upwards in line with expectations from 1.5% to 2.1% on inventories. The September Case-Shiller Home Price Index showed prices advancing at a 5.5% annual rate nationally. But consumer confidence fell sharply, possibly on terrorism headlines out of Europe, dropping to 90.4 in November from 99.1 in October.
With markets closed on Thursday, trading volumes are likely to be light on Wednesday amid a flurry of economic data releases including personal income and outlays, durable goods orders and jobless claims.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
