Stocks rallied again yesterday, amid strong bank profits and better-than-expected economic data. For the first time in nine months, the S&P 500 (SPX) closed above 1,000, and the Nasdaq (NASD) closed above 2,000. And the Dow Jones Industrial Average (DJI) closed above 9,200 for the first time since November.
The ISM Manufacturing Index increased for the seventh time in as many months — this time reporting 48.9 for June. However a sub-50 reading still means that manufacturing is contracting, but the report was better than expected.
The Dow was boosted by gains in commodities.
Alcoa (AA) jumped 7.2%. Bank of America (BAC) rose 2.1% after a management shakeup and an agreement to pay $33 million to settle an SEC civil suit over bonuses paid to Merrill Lynch employees. Ford (F) reported its first increase in monthly sales since ’07.
Energy stocks were especially strong: Massey Energy (MEE), Peabody Energy (BTU), Denbury Resources (DNR) and Nabors Industries (NBR) all rose more than 5%.
Foreign financial stocks pulled their own weight. Barclays (BCS) and HSBC (HBC) led gains in European financials. And domestic banks did well with KeyCorp (KEY) up 11% and Zions Bancorp (ZION) up 4.2%.
The Dow gained 115 points yesterday, closing at 9,287, the S&P 500 was up 15 to 1,003, and the Nasdaq gained 30 points, closing at 2,009.
The NYSE traded 1.2 billion shares with advancers ahead of decliners by 5-to-1. The Nasdaq traded 666 million shares with advancers ahead by more than 2-to-1.
September crude oil rose to $71.58 a barrel, up $2.13, on another day of weakness in the U.S. dollar and more confidence in the world’s economies. The Energy Select Sector SPDR (XLE) gained $1.30 to $51.92.
Gold (August contract) rose $2.90 to $956.60, and the PHLX Gold/Silver Index (XAU) closed at $153.51, up $4.89.
What the Markets Are Saying
I once took a course in point-and-figure analysis from one of the greatest technicians ever, Earl Blumenthal, who had lots of colorful stories and sayings. One of his truisms was, “A stock that makes new highs will continue to make new highs.” And that is the story of the current run on the stock market.
Despite overvalues in the internal indicators, sentiment numbers that are begging you to short stocks, and disbelief by the most seasoned traders, stocks continue to rise.
Yesterday, two very significant barriers were breached: The S&P 500 closed above 1,000, and the Nasdaq finally made it through 2,000 after several unsuccessful attempts.
These barriers have little technical significance, but do carry some psychological weight. When they were breached on the downside in October 2008, the market went into a freefall that almost took the entire world economy along with it.
Now, 10 months later, the market, which is one of the most accurate forward economic indicators, is telling us that the world’s economy has finally turned up.
Several technical indicators did reverse after negative signals. The slow stochastic reversed giving a fresh buy signal. And Moving Average Convergence/Divergence (MACD) turned up despite its overvalued status, and after losing some steam late last week, momentum turned up again.
So another truism, — “Don’t fight the tape” — comes to mind. It is as relevant now as it was in October 2008 — only the direction of the market is different.
“Be long or be wrong.” Sorry, I just can’t seem to help myself.
Today’s Trading Landscape
Earnings to be reported include: Acorda Therapeutics, Albany Molecular Research, Allegheny Energy, Allied Healthcare, Allos Therapeutics, American Capital Ltd., American Equity Investment Life Holding Co., American Medical Systems, American Pacific Corp., American Physicians Service Group, American Public Education, American Shared Hospital Services, Answers Corp., APAC Customer Services, Approach Resources, Archer Daniels Midland Co., ArvinMeritor, Asta Funding, Atmos Energy Corp., Atricure, Avis Budget Group, Banco Itau Holding Financeira S.A., Berry Petroleum Co., BGC Partners, Big 5 Sporting Goods Corp., BigBand Networks, Bill Barrett Corp., BioClinica, Bio-Rad Laboratories, BMC Software, Boston Beer Co., BRE Properties, Buckeye Technologies, CAI International, California Micro Devices Corp., Cambrex, Cameron, Capital Senior Living, Capital Trust, Capitol Federal Financial, Caribou Coffee Co., Catalyst Health Solutions, CBL & Associates Properties, Cedar Fair LP, Cephalon, Charles River Laboratories International, Church & Dwight Co., Cincinnati Bell, Clarient, Cogent, Cognizant Technology Solutions, Coherent, Coinstar, Colfax Corp., Commercial Vehicle Group, CommVault, Companhia Brasileira de Distribuicao, ConseCo., Consolidated Edison, CorVel, Cossette Communications, Cray, Ctrip.com International Ltd., CVS Caremark Corp., D.R. Horton, DaVita, Denbury Resources, Denny’s Corp., Diebold, Discovery Communications, DIVX, Dolan Media Co., Dollar Thrifty Automotive Group, Domtar Corp., Douglas Emmett, Duke Energy Corp., Dupont Fabros Technology, Dyncorp International, Eagle Rock Energy Partners LP, Ecopetrol SA, Electronic Arts, Emerson Electric, Endeavour International Corp., Energy Future Holdings, EnPro Industries, Entergy, Enzon Pharmaceuticals, ESCO Technologies, Evolving Systems, EXCO Resources, Expeditors International, Facet Biotech Corp., Federal Realty Investment Trust, First Industrial Realty Trust, First Merchants Corp., Five Star Quality Care, Franklin Street Properties, Frontier Communications Corp., FTI Consulting, Fundtech Corp., Furniture Brands, Gartner, Gasco Energy, Gaylord Entertainment Co., Genomic Health, Genpact Ltd., Georgia Gulf, Getty Realty, Gladstone Investment Corp., Glatfelter, Global Cash Access, Great Lakes Dredge & Dock Corp., Greatbatch, GT Solar International, Guidance Software, Hansen Medical, Harvest Natural Resources, HCC Insurance Holdings, HCP, Headwaters, Health Net, HealthSpring, Heartland Payment Systems, Henry Schein, Hersha Hospitality Trust, Hewitt Associates, Hill International, Hypercom Corp., I.D. Systems, Iconix Brand Group, Impax Laboratories, Inergy L.P., Innospec, Insulet Corp., Intelli-Check, IntercontinentalExchange, Investors BanCorp., IPG Photonics Corp., Jack in the Box, Jones Lang LaSalle, Kenexa, Kforce, Kindred Healthcare, Kite Realty Group Trust, Knology, Kopin Corp., Kraft Foods, Landauer, LHC Group, Liberty Global, Liquidity Services, LivePerson, LNB BanCorp., Louisiana-Pacific Corp., Macerich, Mac-Gray Corp., Mannatech, Martin Marietta Materials, Marvel Entertainment, Masimo Corp., Matrix Service, Max Capital Group Ltd., MCG Capital Corp., Mednax, Mercury Computer Systems, Molina Healthcare, Mult-Color Corp., National Financial Partners, National Interstate Corp., National Research Corp., Nektar Therapeutics, New York Mortgage Trust, NiSource, Noranda Aluminum Holding Corp., Numerex Corp., NW Natural, Och-Ziff Capital Management Group LLC, Ocwen Financial, Odyssey Healthcare, ONEOK, Onyx Pharmaceuticals, Optelecom-NKF, Orion Energy Systems, Outdoor Channel Holdings, Papa Johns International, Par Pharmaceutical Companies, Pegasystems, Pericom Semiconductor, Perot Systems, PHH Corp., Philippine Long Distance Tel. Co., Pinnacle West Capital Corp., Pioneer Natural Resources Co., Pioneer Southwest Energy Partners L.P., Playboy Enterprises, PLX Technology, Poniard Pharmaceuticals, Powell Industries, PPL Corp., PRG-Schultz International, Progress Energy, Protective Life Corp., RCN Corp., Riskmetrics Group, Rowan Companies, RTI International Metals, Ruddick Corp., S1 Corp., SciClone Pharmaceuticals, Senomyx, Simon Property Group, Skilled Healthcare Group, Sotheby’s, Southwest Gas, Spectra Energy, SPSS, Stanley, StatoilHydro ASA, Strattec Security Corp., Team, Techne, Tenet Healthcare, Ternium SA, Tessera Technologies, The Advisory Board Company, The Pantry, The Phoenix Companies, The St. Joe Co., TNS, Toyota Motor Corp., TransDigm Group, TriMas Corp., True Religion Apparel, TRW Auto, Twin Disc, UBS, UDR, Unit Corp., United America Indemnity Ltd., Universal Corp., Universal Technical Institute, Unum Group, Valeant Pharmaceuticals International, ValueClick, Volcano Corp., Vornado Realty Trust, W&T Offshore, West Pharmaceutical Services, Westlake Chemical Corp., Weyco Group, Whole Foods Market, Yamana Gold, Zebra Technologies and ZipRealty.
Economic reports due: ICSC/Goldman store sales, personal income and outlays (the consensus expects -1.1%), Redbook and Pending Homes Sales Index.
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