Fundamentals, US Markets

US Stocks Close Stronger With S&P500 Marking New High

U.S. Session Key Developments

•    Commodities Fall on Dollar Strength
•    GDP Revision Doesn’t Hamper Optimism
•    Home Sales Lift Expectations

US markets closed up with gains of less than one percent that helped propel the S&P500 to a 2009 high. Similarly the NASDAQ also rose following yesterday’s setting of a new high. Weighing against equities today included weaker commodity prices, as the dollar continued to strengthen, along with revisions to third quarter GDP figures. At the same time, sentiment was lifted by figures including the Richmond Fed’s manufacturing index, and a sharp 7.4% rise in existing home sales for November. Clearly, investors are looking ahead towards acceleration in growth for the fourth quarter and into 2010 with little regard for revisions made to past data. A fundamental shift has consequently taken hold, in which dollar strength appears to be accompanying the equity rally, and not merely the previous trend of weakness that led to higher nominal prices. Ultimately, equities have performed strongly this year with gains of more than 42% in the NASDAQ. Performance next year promises to play on two significant trends. Weighing on both sides will be economic growth versus the Federal Reserve’s eventual need to raise rates. This scenario may not be a serious issue in the next two months, but it’s the fear of hiring rates may increase quickly If growth proves rapid.

DJIA 30                      10,464.93                   +50.79               +0.49%
Following yesterday’s underperformance, the Dow rose modestly by nearly half of one percent to make higher gains than the S&P500. The index saw strength across the board with only 6 of 30 stocks trading down. Low volume and a holiday season has led to less volatility in trading. As such no stock rose more than 1.71% while losses were minimal with GE down 0.58%. Unlike its counterparts, the Dow has not set a new 2009 high.

S&P 500                     1,118.02                   +3.97                 +0.36%
The broader S&P500 index gained the least of the five majors, while managing to close at a fresh 2009 high. Nearly all sectors advanced while Utilities fell 0.65% along with nearly a third of stocks. Liquidity appears to be lower as the holiday season kicks in and trading traditionally declines. Of the ten largest firms, only one saw a move of more than one percent; Apple advanced 1.07%. Ultimately the S&P500 has hardly moved since mid-November, and a new high should be viewed with caution and not overwhelming enthusiasm.

NASDAQ                    2,252.67                    +15.01             +0.67%
An upgrade yesterday to Intel by Barclays, and a forecast increase from Europe’s second-largest chipmaker, Infineon, helped the tech-heavy index outperform to a new 2009 high. 40% of stocks closed lower. Of the ten biggest companies listed by market-value, only Microsoft saw a move of more than one percent to lead the index advance.

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