Daily Market Recap
The market rallied for its biggest gain since 9/13. Europe was the driver. The markets rallied on the belief that the powers that be will step in and buy bonds of troubled nations and prevent further pain on the continent. The market sold off for the past week on fears that the Euros would not come through. With better than expected news coming from Europe today the market was back in risk-on mode.
Spain was in the spotlight today. There was a 60 minute press conference that had a definite impact on today’s trading. It was disclosed that the Spanish reform plan exceeded the recommendations of the EU. Market participants took this to mean that Madrid had done enough to allow OMT bond purchases. The European Commissioner for Economic and Monetary Affairs made a statement that the reform plan was well focused and in certain areas went beyond what the European Commission has recommended. Markets had sold off for the past few sessions in anticipation of this press conference. Rumors mounted earlier in the week that this part of the process had become derailed. When the news came in better than expected buyers came in.
Chinese stocks were up sharply overnight. The Shanghai index was up 2.6% on continued talk of stimulus spending, record liquidity injections and anticipation of a far larger and far reaching economic agenda from the government.
The leaders of the past few days became the laggards today. Cash to fuel the risk-on trade came from selling in consumer staples, telecom and utilities. Large cap pharmaceutical stocks were clear outperformers during the recent decline. Today they simply could not keep pace with the overall market.
Commodities rallied across the board as the risk-on gang rode roughshod today. Precious metals, copper, crude and natural gas all traded higher. Gold was up 1.4% and silver traded more than 2% higher. Crude reversed its recent trend and climbed 2.4%
Good news from Europe helped the financial sector. The correlation between financials and Europe has been quite high in recent weeks. Banks/brokers and life insurers did well. Credit card issuer Discover Financial posted good earnings and soared.
General Electric led the industrial sector higher today. Today the company raised its industrial revenue growth forecast above prior expectations. They also announced they are going to use their massive cash flow to increase share buybacks and increase activity in mergers and acquisitions. The stock reached its highest levels since 2008 today. Capital equipment stocks had come under intense selling pressure over the past several sessions. News of the increased stimulus from China, the higher growth forecasts from GE and the prospect of many of these companies now being potential acquisition candidates for GE were factors that sent names in the space up over 3%.
Homes sales numbers were disappointing. However, building products stocks traded up over 2.5% and many homebuilders were up sharply.
Energy traded up 1.5%. Drillers, refiners and E&P stocks all traded higher with the sharp advance in crude prices.
Source: PFS Group
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