The S&P 500 was higher by 0.54% and the Dow rose 0.44%. The market roared higher in the morning session before half of the day’s gains were given back in the final few hours of trading.
Economic numbers from China were essentially in line. This is better than the large disappointments recently. Interbank lending rates in China have been steadily coming down. The lower rates have reduced fears regarding liquidity there.
Today's manufacturing report led to a rally in early trading. The headline number came in above expectations and the employment component was slightly below expectations. This combination helped to reduce tapering fears. The market also received a boost from rumored M&A activity in healthcare and cable.
Airlines, banks, and transports were leading sectors on the day. Telecom, utilities, and semiconductors were laggards. Airlines were higher after UAL delivered better than expected data. Barron’s wrote a favorable article over the weekend on the railroads. With cyclical stocks performing well today, the high dividend payers underperformed.
There was a broad based rally in the financial space today. Banks, brokers, and insurers outpaced the market. The bank index soared by 1.75% and is near a new 52-week high. Bank margins will actually benefit in the current environment. A steepening yield curve improves banks operating margins.
Apple outpaced a sluggish tech sector today. Apple received an analyst upgrade and there was a positive article on the company in the Wall Street Journal.
Multiline industrials were strong as investors position themselves for a cyclical upturn ahead of quarterly earnings. Aerospace and defense names again performed well. Kansas City Southern was the leading rail name on the day. Barron’s highlighted the company over the weekend. UAL released better than expected revenue data and the stock soared on the day.
Energy traded ahead of the tape as crude rose by 1% and natural gas was slightly lower. Energy has been weak lately and investors have been adding exposure to the space ahead of an expected increase in economic activity in the second half of the year.
Source: PFS Group
