Fundamentals, US Markets

Stocks Rise to Fresh Highs as Wave of Optimistic Buying Continues

U.S. Session Key Developments

•    Commodities Steady as Greenback Recovers
•    Upgrades Buoy Stocks Temporarily

US equities rose to fresh highs on the year following a rocky session in which the Dow turned lower early in the afternoon. Ultimately the main index would rise nearly half-of-one percent to close the highest level since early October 2008. The move came amid slight appreciation in the US dollar, while commodities were mixed throughout the session. Largely affecting the trade were macro developments, including strong data out on Chinese production and trade while Japan saw a higher-than-expected increase in machine orders. Elsewhere, European stocks advanced on positive earnings from major firms as well as several large banks including Credit Agricole and UniCredit. Closer to home, retailer Macy’s reported a small Q3 loss while raising its full-year profit outlook to a smaller year-over-year decline. Similarly, the CEO of shipping service provider UPS commented that the firm will raise prices in 2010 as growth in volume is expected as economies expand. Ultimately, stocks this week have moved higher as last week’s non-farm payroll report, coupled with speeches from several regional Fed Presidents, have helped to assure traders that monetary easing will not fade quickly. Further weakness in the greenback would fuel further upside in stocks as US multi-national firms become more competitive. At the same time, the dollar correlation to equities remains a considerable factor and upcoming data including jobless claims, and trade deficit, could define the near-term move.

DJIA 30                      10,291.26                   +44.29               +0.43%
The Dow rose to a fresh 2009 high as the index climbed for the sixth consecutive session with a small gain of nearly half-of-one percent. The recent move has been defined by a clear support at the 50-day moving average and, following last week’s mediocre non-farm payroll release, investor confidence increased that the Fed will not change course in the near-term. Leading performance today was a 1.1% gain in Consumer Services. Bank of America rose the most with a 2.5% advance, following by nearly two percent moves in Intel and Home Depot. Despite the new high, the speed of the recent advance makes entering at the high a risky trade.

S&P 500                    1098.51                   +5.50                 +0.50%
Similarly to the Dow, the broader S&P500 index closed higher by half-of-one percent with gains in all sectors except for utilities. Financials led the advance as reports in Europe highlighted improvements in the financial system, while speculation of prolonged monetary easing will provide for considerable returns to bank loan operations. Of the ten largest firms, only Johnson & Johnson declined by 0.59%. Ultimately, much of the gains today were minimal, with few of the top 50 companies seeing sharp rallies.

NASDAQ                         2,166.90                    +15.82             +0.74%
The tech-heavy NASDAQ ended the session with the highest move of the five majors as the tech sector climbed nearly one percent while financials rose 1.37%. More than 60% of stocks posted gains with eight of the ten-largest firms in the green.  Ultimately, the technology sector remains the best equipped to handle possible weakness in the economy as many of the firms are well capitalized and have significant global presence to limit US exposure.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com