The S&P 500 rose by 1.48%, and the Dow was higher by 1.21%, after the market had been lower each trading day this week. The S&P 500 went below its 50-day moving average intraday. The put/call ratio suggested that investors were increasing their bearish bets on the market; several times, this action has been a perfect setup for a rally in the market. That is what happened today. Early selling, fueled by the sharp decline in Japan overnight, failed to drive the market significantly lower, and then buyers stepped in.
Homebuilders, steel, semis, and media were leaders, while managed care, banks, and staples lagged. Homebuilders were boosted on better-than-expected jobless claims as well as reports from the Wall Street Journal that Fed Chairman Bernanke will calm market fears over tapering at his next press conference.
Commodities were mostly lower, with precious metals, copper, crude, grains, and natural gas all trading below the tape. Gold traded off its lows to close lower by 0.31%. Silver finished off its lows and eked out a gain of 0.06%. Crude was off by 0.79%.
Financials finished higher by 1.80%. REITs were the leaders today. REITs moved higher for the first time since talk of tapering has hit interest rate-sensitive stocks. Several REITs climbed by better than 3% on the day. Insurance stocks traded in line with the market. Goldman Sachs and Morgan Stanley led the major investment banks/brokers higher.
Technology went up across the board: hardware was led by IBM and EMC; telecom equipment names continued to move higher; Ciena, Juniper and Cisco all traded higher; semiconductors rose by better than 2% after seeing some profit-taking over the past few sessions. There was little news in relation to the stocks – confidence increased that overall technology spending will improve in the second half of the year.
Industrials were quiet on the day in terms of news flow. The sector traded in line with the market. With the risk-on trade working today, multi-line industrials were in favor today. Capital equipment stocks reversed their recent trend and moved higher today. Aerospace/defense names were in line with the tape; analyst coverage of the space today was positive. Positive factors in the group are continued global traffic growth from emerging economies, elevated fuel prices, and easy financing for aircraft. Transports traded ahead of the tape: parcels and truckers were the leaders today; both groups are leveraged to the overall health of the economy, and were bought today.
Baker Hughes and Halliburton both moved aggressively higher on analyst upgrades. The space has lagged the market recently, and the risk-on sentiment resulted in the group moving higher today.
Consumer discretionary stocks outperformed staples on the day: restaurants and clothing retails were especially strong; Starbucks was higher by better than 2% on positive analyst commentary.
Source: PFS Group
