Fundamentals

US Equities Open New Month Higher As Data Beats Estimates

U.S. Session Key Developments

•    US Factory Output Expands At Fastest Pace Since 2004
•    Commodities Higher As Dollar Pullbacks
•    Exxon Mobile Earnings Exceed Estimates

US Equities opened February with a bang as each of the three major US indices rallied more than a full percentage point higher.  The lift came after the Institute for Supply Management reported that factory output, as measured by its Manufacturing Index, expanded at the fastest pace since 2004.  Analysts had been expecting a reading of 55.6 while the actual figure was 58.4.  Of less importance on the economic docket this morning were the Commerce Department’s reports on Personal Income and Personal Spending.  Though personal income growth exceeded analysts’ estimates, personal spending continues to lag, suggesting that consumers continue to save more as the world’s largest economy exits a recession many believe was brought on by consumers over levering.  Currencies rallied against the greenback as investors used the positive ISM data as an opportunity to buy riskier assets.  The dollar index was off Friday’s six-month high to close the session at 79.192.  The dollar’s pullback, coupled with the morning’s data, led commodities to advance and the Materials and Energy sectors to lead the stock markets higher.  In the energy space, crude was 2.83 percent higher to 74.95 and natural gas was 5.85 percent higher to close at 5.43.  Among precious metals, gold was 2.05 percent higher to 1,105 and silver was up 2.90 percent to 16.66.  Tomorrow’s economic slate is clear of any high importance announcements so price action will probably come from earnings and overseas data as investors position ahead of the Non-Farm Payrolls report this Friday.

DJIA 30                     10185.53                    +118.20                       +1.17%
The Dow Jones Industrial Average was higher as only two of its components finished the day in the red.  Basic Materials stocks were the best performers of the day as DuPont and Alcoa Inc gained 3.22 percent and 4.95 percent respectively.  The sector was higher off of strength in the commodities space.  Energy stocks, led by Exxon Mobil Corp., were right behind materials.  Exxon, the world’s largest oil company announced today that profits were 8 percent higher than the analysts’ average.

S&P 500                     1089.19                       +15.32                         +1.43%
The broad-base S&P 500 was the best performer of the three major indices as there were nine advancers for each declining issue.  All 10 sectors of the index were in the green today and all components of the Basic Materials and Energy sectors were higher in today’s session.  Gannett Co., the largest US newspaper publisher, was the worst performer on the S&P 500, as it forecast first-quarter revenue that trailed analysts’ estimates.

NASDAQ                    2171.20                       +23.85                        +1.11%
The tech-heavy Nasdaq Composite was higher today after tech stocks dragged the broader market lower last week.  Amazon.com Inc. was in the news after the world’s largest internet retailer first stopped selling Macmillan books on its web site and then gave in to the publisher’s demands to charge more for titles on the Kindle digital reader.  This is the first sign of the effect Apple’s newly released iPad will have on the e-book space and how Amazon will react to the threat.  Amazon’s stock was down 5.2 percent on the day.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com