Cisco Pulls Equities Out Of Trading Range; German Chancellor Merkel Assists

[Chart courtesy of MarketWatch.com]

Boosted by solid tech and housing data, US stocks rallied Thursday with the S&P 500 hitting its highest level since April even though regional manufacturing data remained mostly disappointing. Angela Merkel provided additional support to the markets after the German Chancellor said Berlin remains committed to the single currency during a trip to Canada.

All the three indexes ended higher after the tech sector went into overdrive following strong performance by network equipment manufacturer Cisco Systems in the second quarter. The tech-laden NASDAQ gained the most, adding about one percent on the day.

In their typical facicious way, ZeroHedge served up the following spot on comment:

All those who were patiently waiting for the S&P futures to close at new 2012 highs as the catalyst for Bernanke to announce QE3, can now exhale (if we end here): with S&P 500 2012 year-end earnings estimates the lowest they have been all year; with corporate revenues now negative quarter-over-quarter; and with US economic output sliding and GDP back under 2%; coupled with another step backward in housing; it was only logical that the S&P would close at fresh 2012 highs.

And now, it is time for the NEW QE, LTRO 3 and more RRR and Interest Rate cuts from China and all shall be well.

US Treasuries extended their losing spree with both the 10-year and 30-year Treasury yields rising after a Commerce department report said building permits increased 6.8 percent in July to a seasonally adjusted annual rate of 812,000 in July. The strength in housing-permits shows the resilience in the sector’s recovery, argued analysts following today’s release.

The USD tracked lower across the board with the euro regaining the 1.23 level as investors weighed mixed economic data with housing and initial jobless claims. The dollar index, an indicator of the greenback’s strength against a basket of six currencies, dropped 82.392 from 82.649 in late North American trade today on improved risk sentiments.

Wavering between gain and loss, European stocks ended higher on improved initial weekly jobless claims data. The Spanish IBEX 35 index leapt 4.1 percent after media reports suggested Madrid may accelerate the financial bailout for its banking sector.

However, European Council spokesperson Olivier Bailly said on Thursday Spain has made no formal request to tap a EUR 30 billion available tranche to recapitalize its ailing banks.

Banking stocks, particularly in Spain and Italy, rallied on the news though analysts warned equity prices may tumble in both the countries swiftly if the ECB fails to deliver.

Within the ETF universe, the iShares MSCI Spain Index Fund (EWP) surged 5.29 percent after media reports suggested Madrid is ready to request a EUR 30 billion tranche to recapitalize its struggling banks.

As December gold future prices added nearly 1 percent on the day, gold miners shined. The Van Eck Market Vectors Junior Gold Miners ETF (GDXJ) rose 3.26 percent while the Market Vectors TR Gold Miners (GDX) jumped 3.40 percent.

I will post the latest StatSheet and updated Trend Tracking Indexes (TTIs) later on tonight.

Disclosure: No holdings

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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