The major averages reversed course from yesterday’s sell off. The S&P 500 was higher by 0.95% and the Dow rose 0.69%.
A rebound in China overnight and better than expected economic numbers proved to be positive catalysts today. May new home sales came in at 476,000 against a consensus estimate of 460,000. Also, June Consumer Confidence was well above the expected number of 75.0 with an actual reading of 81.4.
The consumer confidence number posted today was a jump of 7.1 points from last month’s level. The number has increased in each of the last three months and the June level was the highest reading since January of 2008.
The Case-Shiller house price index and the FHFA house price reading continued to signal improvement in the housing market. Home sales have picked up and inventory levels remain low. Prices in all 20 cities in the Case-Shiller index have increased for five straight months.
Durable goods orders increased 3.6% in May with a boost from transportation. Equipment and software spending both grew much better than expected.
Financials remain volatile. They were sold off aggressively yesterday. The buying pressure in the sector was just as aggressive today. Financials increased in value by 1.8% on the day. The sell off yesterday was caused by greater global risk due to weakness in China. Today the focus returned to the positive impact a steepening yield curve will have on earnings for financials. Today was the largest one day advance for the banking index since January.
Industrials were strong today with little specific news flow associated with the sector. A more favorable view on growth set a positive tone. Several economic data points released in the past few weeks have not just exceeded consensus estimates, but have been above every single estimate that makes up the consensus.
Lennar reported better than expected earnings today. They beat on both the top and bottom line. They reported that demand for new homes has not slowed down at all with the recent increase in mortgage rates.
Transports traded higher by 2% with rails, parcels, airlines, and truckers all performing well. This group is heavily leveraged to the economy and was in favor due to the positive economic reports released today. Strong durable goods orders and favorable housing related numbers set a positive tone for the group.
Energy stocks traded just ahead of the tape with natural gas trading 2.25% lower and crude flat. Solar stocks traded higher after favorable comments from President Obama on using renewable energy.
Casual dining restaurants and retail were strong industry groups within the consumer discretionary sector. JC Penney, Michael Kors, and Ann Inc. were leaders in the retail space.
Source: PFS Group
