U.S. equities surged to new record highs on Monday as Hurricane Irma wasn’t as catastrophic as initially feared. This, combined with fading concerns over North Korea’s nuclear threat, excited the bulls.
In the end, the Dow Jones Industrial Average gained 1.2%, the S&P 500 wafted up 1.1% to hit a record close, the Nasdaq Composite added 1.1% and the Russell 2000 finished the day 1.1% higher. Treasury bonds sold off, the dollar rallied 1.5%, gold lost 1.1% on a diminished safe haven bid and oil gained 1.2%.
Click to Enlarge Breadth was heavily positive, with advancers outpacing decliners by a 3.7 to 1 ratio with volume at 105% of the NYSE’s 30-day average. Financials led the way with a 1.7% gain while telecoms were the laggards, up just 0.4%.
Continuing the recent strength in the biotech/pharma space, Teva Pharmaceuticals Industries Ltd (ADR) (NYSE:TEVA) gained 19.4% after announcing a leadership change. Allegheny Technologies Incorporated (NYSE:ATI) gained 8% on an upgrade from analysts at Bank of America Merrill Lynch citing ramping production of Boeing and Airbus aircraft. Seagate Technology PLC (NASDAQ:STX) fell 3.3% after being downgraded at Jefferies after channel checks showed tepid demand for 10TB helium drives.
Turning back to Irma, the New York Times cited a study by Enki Holdings that cut their projected storm losses to $49 billion from a Sunday projection of $172 billion. Adding to the muted impact has been an increase in chatter from Federal Reserve officials that hurricane impacts could delay the timing of the next interest rate hike — which seems to have been penciled in for December, but likely is now pushing to 2018.
Click to Enlarge With a bid coming out of safe havens today, it’s important to remember that since President Trump’s “fire and fury” warning to Pyongyang, gold and long-term Treasury bonds continue to outperform stocks and the dollar.
Could a sea change be underway? It’s possible. Big-cap tech stocks were on the move, with the “FANG” stocks up the most since July 17.
The relationship between the Powershares High Beta S&P 500 (NYSEARCA:SPHB) and the 20+ Year Treasury Bond (NASDAQ:TLT) maps this dynamic, with today’s surge looking a lot like the one-day-wonder seen on Sept. 1 that gave way to renewed selling pressure. But the
But the bears better hurry up if they are going to do something: The Dow has spent the better part of the past two months riding the rails of its 50-day moving average.
A bounce is looking increasingly likely.
Check out Serge Berger’s Trade of the Day for Sept. 12.
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.
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Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.