U.S. stock markets soared yesterday, boosted by better economic news from China, a decision by the Bank of England to hold current rates, positive data from Australia, and a stronger euro. Even Spain chimed in with a successful bond offering. And there was positive domestic news in the form of better-than-expected weekly job numbers.
According to the Wall Street Journal, traders said that, “they are focused more broadly on global growth, including developments in other major regions that seem to be suffering little ripple effect from Europe’s struggles.”
International companies benefitted from the round of buying, with Caterpillar Inc. (NYSE: CAT), up 5.5%, leading the Dow’s rush higher. American Express Company (NYSE: AXP) gained 5.04%, Chevron Corporation (NYSE: CVX) gained 4.77%, and Alcoa Inc. (NYSE: AA) rose 4.17%.
Energy stocks were higher yesterday, after being hammered over the last week. Anadarko Petroleum Corporation (NYSE: APC) rose 12.4%, Baker Hughes Incorporated (NYSE: BHI) gained 10.7%, and Diamond Offshore Drilling, Inc. (NYSE: DO) was up 7.4%. BP plc (NYSE: BP) jumped 12.26%.
The euro rose to 1.21 against the greenback. This was the first time in over a week that it traded at that level. And the U.S. Dollar Index fell 1%.
At the close, the Dow Jones Industrial Average jumped 273 points to 10,173, the S&P 500 rose 31 points to 1,087, and the Nasdaq rose 60, closing at 2,219.
The NYSE traded 1.3 billion shares with advancers topping decliners by over 5.5-to-1. The Nasdaq crossed 628 million shares and advancers outnumbered decliners by 5-to-1.
Crude oil for July delivery gained $1.10 at $75.48 a barrel, and the Energy Select Setor SPDR (NYSE: XLE) gained $2.58, closing at $53.99.
June gold declined $7.70, settling at $1,220.80 an ounce. The PHLX Gold/Silver Sector Index (NASDAQ: XAU) rose $2.57 to $175.
What the Markets Are Saying
After four consecutive days of losses, we should not be surprised by yesterday’s rally from a major support zone that was marked by double reversals on the Dow Industrials and three reversals from the S&P 500.
With yesterday’s huge pop, our internal indicators gave a volley of short-term buy signals. However, with the long-term trend neutral to down, and close to a bearish signal, and both the intermediate- and short-term trends still down, it’s difficult to get very bullish.
Even though yesterday’s reactive rally was supported by strong breadth, volume was low. We’ve seen this low upside/strong downside volume picture since early March, and the overall results speak for themselves.
The other troublesome trading pattern is the market’s frenetic reaction to news — both good and bad. This tells us that stocks are not held in strong hands, and that the motivation for both buyers and sellers is fear — fear to lose on bad news and fear to miss the move higher on good news.
Unless someone somewhere comes up with a disaster someplace, we should expect a strong opening with increased buying by speculators. But the Dow, S&P 500 and Nasdaq are approaching some formidable resistance in the form of the 20- and 200-day moving averages, as well as deep zones of sellers. It would take an extremely optimistic trader to go into the weekend holding purchases made at Thursday’s prices through a weekend of potentially horrid news.
I’ll still wait this out until the technical picture is less murky.
Today’s Trading Landscape
There are no significant earnings reports due today.
Economic reports due: retail sales (the consensus expects 0.4%, 0.2% ex-autos), consumer sentiment (the consensus expects 74), and business inventories (the consensus expects 0.5%).
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
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