Monday, November 23, 2009

Higher Finish for Stocks to Open Holiday Week

Encouraged by an impressive 10.1% monthly gain in existing home sales for October, to a seasonally-adjusted annual rate of 6.10 million units, investors piled into stocks with reckless abandon Monday morning. Once again, the risk trade provided additional lift, as the US Dollar fell against most major foreign currencies. Shortly after 10:00 am ET, the Dow Jones Industrials reached their highs of the day, up more than 175 points, with dead aim at 10,500.

Though stocks meandered throughout the remainder of the session and finished off their highs, it was still a robust trading day in New York, with renewed buying interest during the final half-hour. Stocks finished much closer to their high than the open, countering three straight days of losses and leaving the Dow at a closing high for the year.

The NASDAQ and S&P finished with healthy gains, retracing toward the highs set early last week. With markets closed Thursday for the Thanksgiving holiday and a half-day session on Friday, stocks are poised to finish November on a high note. The last day of trading for the month is a week away, on the 30th.

Dow 10,450.95, +132.79 (1.29%)
NASDAQ 2,176.01, +29.97 (1.40%)
S&P 500 1,106.24, +14.86 (1.36%)
NYSE Compos 7,186.33, +101.86 (1.44%)

Advancing issues outperformed decliners handily, 4845-1644, or roughly 3:1. New highs totaled 429, to just 69 new lows. Volume continued to be disappointing to many market observers, though by now the lower volume figures have to be accepted as the "new normal" as the recovery for stocks continues to stretch its gains. Those in the bearish camp cannot honestly espouse the thinking that this rally, devoid of heavy volume for the most part, is not the real deal. A nearly 4000 point rise in the Dow Jones Industrials has to be considered an exceptional rally, no matter the level of trading. Those who have missed one of the largest moves in the history of the market are only trying to salve the wounds received from non-participation.

NYSE Volume 4,468,339,000
NASDAQ Volume 1,859,754,500

Gold continued to be the story of the year, gaining another $18.00, to $1,164.80, another record close. Silver did its best to keep pace, picking up 18 cents, to $18.59. Oil was hardly affected, up just 9 cents, to $77.56.

Today's rather euphoric sentiment may not be long-lived, however, as more economic data will flow to the market prior to the opening bell on Tuesday. The second reading on GDP is expected to come in well short of the initial measure from last month of 3.5% growth. Experts are looking for a more temperate 2.8% read. At 9:00 am, the Case Shiller 20 City Index is released. Fed minutes from their November meeting are due out at 2:00 pm. The minutes are highly-anticipated. After keeping interest rates at the same level last month, analysts did not get any clue as to future Fed moves. There is hope in some camps that the central bank will offer more clarity about when it plans to tighten (raise) rates.

On the bullish side, the outlook is for the Fed to reveal little more than the normal shadowy wording that normally accompanies the initial release. Besides the US dollar trade set-up being currently positive for stocks, investors aren't really keen on the Fed making any premature moves, and, if history is any guide, they'll be in no hurry to take away the punch bowl, tightening only when inflation already has a firm grip. With Ben Bernanke - an inflation dove - at the helm, expect this Fed to keep rates low for much longer than necessary.

Those seeking some guidance from the wording of the minutes are those same bearish types who still have cash in money market funds, earning less than one percent. For them, the market gains are painful. For those in the game, it's been a delight.

No comments: