Tuesday, October 6, 2009

Gold Soars to New Highs; Stocks Up Big to Open Week

With earnings season about to begin, investors were jumping not only into stocks of all varieties, but especially into gold and other commodities in the first two trading days of the week, sprouting big gains in all sectors and sending gold to all-time highs above $1040 in NY trading.

The Dow and other major averages erased the losses of last week associated with the poor jobs data from September and began looking ahead to corporate earnings reports which begin on Tuesday with Yum Brands (YUM) and proceed into Wednesday with Monsanto (MON) reporting before the opening bell and Alcoa (AA) after the close.

As of this writing, YUM reported better-than-expected earnings of 69 cents per share in the third quarter, topping expectations of 58 cents per share, even though revenue slowed and same-store sales slipped 6% for the owners of Pizza Hut, Taco Bell and other national food outlets.

The moves in the market have been largely associated with a weakening dollar, which continues to delight stock traders but worries those who look at the macro-economic picture. A weaker dollar causes imports to cost more, wages to stagnate, but boosts profits on exports as their lower prices spur demand in foreign countries.

The greenback has been slumping of late, especially on Tuesday, as the Australian Central Bank increased key interest rates, saying that their economy was basically back on a sound footing. That sent the dollar index into a tailspin, boosting the price of commodities, in particular, gold.

Dow 9,731.25, +131.50 (1.37%)
Nasdaq 2,103.57, +35.42 (1.71%)
S&P 500 1,054.72, +14.26 (1.37%)
NYSE Composite 6,899.68, +104.55 (1.54%)

Stocks put in their second consecutive strong session, with all sectors positive and advancing issues beating decliners, 4965-1499, or better than 3-1. New highs were popping up everywhere, with 510 stocks making new 52-week tops, as compared to just 49 new lows. Volume was lighter than many trading veterans would have liked to have seen, though lower volumes have been a trademark of the now-7-month-old rally.

NYSE Volume 5,894,104,000
Nasdaq Volume 2,430,495,250

The commodity story was all positive, with crude oil advancing 47 cents, to $70.88; gold officially closing in New York up $21.90, at $1,039.70, and silver adding 76 cents, at $17.30.

Traders will be looking at earnings results from Monsanto (MON) before the market opens and will likely cheer the results of Yum! Brands, looking to go 3-for-3 in gains on the week.

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