After an opening stumble, stocks rallied on news that pending sales of existing homes rose in December more than forecasters had predicted. Upgrades of Alcoa (AA) and Freeport-McMoRan (FCX) by Citigroup (C) brought support for the materials stocks, and an upgrade of Schnitzer Steel (SCHN) by UBS (UBS) helped steel stocks.
Homebuilder D.R. Horton (DHI) posted its first quarterly profit since the beginning of the housing slump. Its shares rose 1.3% and contributed to a round of buying in the housing sector.
However, volume still hasn’t reached the levels seen on the downside, and investors are eyeing the jobs report due late this week for confirmation of a stronger economy.
Energy stocks did well yesterday, as did other commodity-based stocks. This was due in large part to a small decline in the U.S. dollar, which was down 0.2%.
At the close, the Dow Jones Industrial Average (DJI) rose 111 points to 10,297, the S&P 500 (SPX) gained 14 points to 1,103, and the Nasdaq (NASD) rose 19 points to 2,190.
Volume on the NYSE approached 1.2 billion shares, with advancers over decliners by more than 3-to-1. The Nasdaq traded 756 million shares, and advancers led by 4-to-3.
Crude oil for March delivery settled $2.80 higher at $77.23 a barrel, and the Energy Select Sector SPDR (XLE) gained 74 cents to $57.04.
April gold rose $13 to $1,118 an ounce, and the PHLX Gold/Silver Sector Index (XAU) gained 42 cents, closing at $156.55.
What the Markets Are Saying
While the Dow had its second triple-digit day in a row, rising 2.3% for its best performance since early November, it is still more than 4% below its December high. Like Monday’s rally, yesterday’s triple-digit pop also lacked volume. Together the two days averaged only about 1.1 billion shares on the NYSE, while the decline from the mid-January high averaged more than 1.5 billion.
But the two-day rally has produced some good news: The bounce has broken both the Dow and the S&P 500 from their bearish channels by penetrating the resistance lines delineating the tops of the channels, and then closing above the highest intraday prices in the channels.
This sets them up nicely for a run at the 50-day moving averages just above yesterday’s closes. For the Dow that number is 10,433, and for the S&P 500 it is 1,115.
And there is another positive: After our most-watched internal indicators reached their lowest numbers since the March bottom, each has reversed up. The stochastic even flashed a buy signal on both the Dow and the S&P 500 yesterday.
So, after the shock of losing so much ground in such a short time, investors seem willing to grab at some undervalued gems. But the question is, do the bulls have enough courage and cash to close above the 50-day averages and reestablish the intermediate uptrend lines that were so quickly obliterated?
Today’s Trading Landscape
Earnings to be reported before the opening include: Alvarion, Ameristar Casinos, Arrow Electronics, ATMI, AudioCodes, Beacon Roofing Supply, Black & Decker, Brinks, Carlisle Companies, Comcast, CommVault Systems, Dawson Geophysical, Diebold, Enbridge, Headwaters, Health Net, International Paper, Invesco Mortgage Capital, Investment Technology, ITT, Lazard, M/I Homes, Magellan Midstream Partners, MarketAxess Holdings, National Oilwell Varco, Ness Technologies, O2 Micro, Pfizer, Polo Ralph Lauren, Powell Industries, RADVision, Roper Industries, Ryder System, Savvis, Schering-Plough, Silicon Labs, Thermo Fisher, Time Warner, Travelzoo, United Micro, Western Union and Wolverine World Wide.
Earnings to be reported after the close: 99 Cents Only, Affymetrix, Akamai Technologies, Ameriprise Financial, Annaly Mortgage, Assurant, Atwood Oceanics, AvalonBay Communities, Blackboard, Brightpoint, Bristow Group, Broadcom, Cadence Design Systems, CB Richard Ellis Group, CBL & Assoc, Central Garden & Pet Co., Chemspec International, Cisco Systems, Concur Technologies, Covenant Transport, Dolby Labs, Double-Take Software, Dyncorp nternational, Entropic Communications, Equifax, Equity Residential, FEI Company, Fidelity National Financial, Furniture Brands, Genomic Health, Hain Celestial, Harris Stratex, Hill-Rom Holdings, Horace Mann, IDEX Corp., InfoSpace, Kimco Realty, Markel Corp., Measurement Specialties, MEMC Electronic Materials, Monster Worldwide, Neurocrine Biosciences, Newport, Novellus Systems, ON Semiconductor, Open Text, Opnet Technologies, Orleans Homebuilders, Pericom Semiconductor, Regal-Beloit, Regency Centers, RightNow Technologies, Sangamo Biosciences, Selective Insurance Group, Silicon Storage Technology, Spartan Stores, Spherion, Standard Pacific, Stanley Furniture, Steel Dynamics, Symmetricom, THQ, Triumph Group, TrueBlue, United Rentals, Universal Forest, Virage Logic, Visa, Walter Energy, WGL Holdings, Willis Group Holdings and YUM! Brands.
Economic reports due: MBA purchase applications, ADP employment report, ISM non-manufacturing index (the consensus expects 51), and EIA petroleum status report.
Quarterly earnings news (reported vs. estimate):
- Alvarion (ALVR) 1 cent vs. 0 cents
- Brinks (BCO) 41 cents vs. 49 cents
- Headwaters (HW) -23 cents vs. -15 cents
- Pfizer (PFE) 49 cents vs. 50 cents
- Thermo Fisher (TMO) 91 vs. 88 cents
- Time Warner (TWX) 55 cents vs. 52 cents
- United Micro (UMC) 6 cents vs. 4 cents
- Wolverine World Wide (WWW) 45 cents vs. 45 cents
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