Yesterday’s good news drove stocks higher as hardly a shred of negative news crossed the tape.
It started before the 9:30 opening bell when President Obama’s spokesman said that the president would reappoint Fed Chairman Ben Bernanke to lead the Federal Reserve Bank of the United States.
Then a series of strong economic reports hit the tape, starting with S&P Case-Shiller Home Price Index. For the first time in three years, the index increased for two consecutive months by posting a rise of 1.4% in June. Home prices are down 15.4% in the past year, but that’s still an improvement over the record decline of 19% (year-over-year) in January.
If that wasn’t enough, consumer confidence for August came in at 54.1 versus an expected 47.9. And it was above July, which was reported at 47.4.
Even though oil declined, it had only a marginal impact on stocks.
The consumer, financial and industrial stocks were strongest. Retailers were up, led by Big Lots (BIG), which was up 1.57% after reporting better-than-expected earnings. Chico’s (CHS) beat estimates, too, and gained 0.9%. Coach (COH) gained 4.39%, and Macy’s (M) rose 3.46%.
At the close, the Dow Jones Industrial Average (DJI) was up 30 points to 9,539, the S&P 500 (SPX) gained 2 points to 1,028, and the Nasdaq (NASD) rose 6 points to 2,024.
The NYSE traded 1.1 billion shares with advancers ahead by 9-to-5. On the Nasdaq, there were just 190 more advancers than decliners (1,397 to 1,207) with volume of 589 million shares.
Crude oil for October delivery fell $2.32 to $72.05 a barrel, and the Energy Select Sector SPDR (XLE) lost 81 cents, closing at $52.21.
December gold rose $2.30 to $946 an ounce. The PHLX Gold/Silver Index (XAU) closed at $146.94, up 78 cents.
What the Markets Are Saying
At mid-week we usually take a look at the various market indicators. The internal indicators like Moving Average Convergence/Divergence (MACD), stochastic, Relative Strength Index (RSI), etc., are now modestly overbought, while the sentiment indicators, AAII, insider activity, public activity, put/call ratios, etc., are now generally overbought.
Advisor sentiment, as reported by Investors Intelligence, shows 48.3% bulls down from 49.4% the week before, and bears increased to 23.1% from 21.3% the prior week. Investors Intelligence notes that sentiment is therefore negative since this contra-indicator shows more bullish than bearish advisers.
Conclusion: Most indicators are now modestly overbought but could become even more overbought. Caution is in order since a modest decline of 5% could take prices back to the near-term levels just before Friday’s breakout.
Despite yesterday’s somewhat tepid response to a bundle of excellent reports and the reappointment of Chairman Bernanke, momentum is on the side of the bulls. Volume is puny with more buyers than sellers, but prices continue to seek higher levels.
Today’s Trading Landscape
Earnings to be reported include: AECOM Tech Corp, Benihana, Brown Shoe Co., Canadian Imperial Bank of Commerce, Charming Shoppes, Coldwater Creek, Dollar Tree Stores, DSW, FuelCell Energy, Guess, Heico Corp., Jo-Ann Stores, New York & Co., OSI Systems, Sigma Designs, SWS Group, TiVo and Williams-Sonoma.
Economic reports due: Mortgage applications, durable goods orders (the consensus expects 2.5%), new home sales (the consensus expects 390,000), and U.S. Energy Department oil inventories.
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