Remember when this was supposed to be a stock picker’s market?
Stocks continued their late-year rally on Tuesday, as the continued combination of low volume and lack of bad news to pierce investor enthusiasm worked to drive markets higher.
For index investors, it was another easy session. The S&P 500 index rose nearly 8 points, or 0.6% to close at 1,255 — and is now up 6% in December alone.
The Dow Jones Industrial Average got back to its winning ways, gaining 55 points to 11,533, and, as was seen Monday, two-thirds of its components were in the green. The Nasdaq finished 18 points higher to 2668, as tech stocks look almost certain to close out 2010 outperforming the broader market by at least 5 percentage points.
However, it was the rebound in financial stocks that carried the market’s water on Tuesday. The Financial Select Sector SPDR (XLF) exchange-traded fund gained 1.7% to $15.80, and has returned to an interesting technical level that, despite expectations of continued light volume, bears watching for the rest of the week. The ETF was turned away from this point two weeks ago, providing about the only hiccups to the broader market’s march higher this month.
Shares of Dow components American Express (NYSE:AXP) closed higher, as did Bank of America (NYSE:BAC).
But regional banks also performed well. The SPDR KBW Regional Banking ETF (KRE), which finished 2.3% higher. Fund holdings such as Cathay General Bancorp (NASDAQ:CATY) and
Signature Bank (NYSE:SBNY).
This holiday cheer for financials was not extended by analyst Meredith Whitney, who appeared late Tuesday on CNBC, fresh off her appearance last Sunday on 60 Minutes, where she was last seen warning about the coming municipal and state government defaults.
On CNBC, Whitney reiterated her expectation of the crises to come, saying there is no way they are priced into the market. She also sees the current outperformance from regional banks as due to investor hope for consolidation. Whitney doesn’t expect large-cap financial services companies to do well because their loan books are shrinking.
Commodities were mixed: gold and silver took a breather, coffee boomed and cotton was finally repelled from its all-time highs; the iPath DJ-UBS Cotton Subindex ETF (BAL) actually losing 3% on Tuesday after posting a gain of more than 40% in just the last four weeks alone.
And yet for those more skeptical of the market beyond this month longer, the day’s news did have a few kernels that surging prices for raw materials can be a good thing forever. Witness ConAgra’s (NYSE:CAG) profit report earlier Tuesday, which saw the food manufacturer say it plans to boost prices, given the sharp increase in proteins, oils, grains and packaging.
“We simply cannot have deflationary or even flat pricing in light of significant and accelerating input cost inflation,” the company said.
How well that will play with consumers seems to be a question for 2011, not for investors still enjoying the recent rally.
