Early Sell Off Followed By Higher Close On Mixed Economic Data; Europe Ends Unchanged

[Chart courtesy of MarketWatch.com]

US stocks fought back, rebounding from earlier losses Tuesday as a rally in retail and transportation shares eclipsed concerns about discussions on raising the debt ceiling in Washington, while further weakness for Apple weighed on the technology sector.

On the economic news front, reports showed US retail sales rose 0.5 percent in December, led by an improvement in auto sales while producer prices fell 0.2 percent. Manufacturing, however, continued to be a weak spot with the Empire State Index, the gauge of manufacturing activity in the New York region, slipping for the sixth straight month in January as the industry faced the effects of lackluster demand overseas and fiscal uncertainty at home, according to the New York Federal Reserve Bank.

With as little as a month until the US runs out of money to honor its liabilities, Federal Reserve Chairman Ben Bernanke urged the Congress to raise the debt ceiling swiftly while President Obama warned Republicans not to leverage the need for a debt-limit increase to force through spending cuts.

The Congress has revised or raised the country’s debt ceiling 79 times since 1960, including 49 times under Republican presidents. Any delay in raising that ceiling would lead to a formal review of the nation’s AAA credit-rating, Fitch Ratings reiterated today.

The Dow Jones Industrial Average (DJIA) climbed 28 points and the Dow Jones Transportation Average rallied today, extending this year’s gain to 6.3 percent, compared with a 3.2 percent rise in the S&P 500. The index underperformed the S&P 500 last year, gaining only 5.7 percent in 2012.

Apple Inc., the world’s most valuable company, slipped 3.2 percent, pushing two of the three benchmark indexes in red. The stock sank four percent Monday on reports that it had cut iPhone 5 orders due to weak demand.

Dell Inc extended gains into a second session, adding 7.2 percent Tuesday after a Bloomberg report suggested the world’s third largest PC maker is discussing a leveraged buyout with private-equity firms Silver Lake and TPG Capital.

Treasury prices rose for a third session, pushing yields down to their lowest this year as demand for safer assets spiked following speculations that a prolonged political negotiation over the US debt limit in Washington will slowdown recovery.

European stocks changed little as optimism over a better-than-targeted Spanish debt auction was offset by weaker-than-expected German economic growth data.

The Stoxx Europe 600 index fell less than 0.1 percent following Monday’s 0.4 percent slide, but still up 2.3 percent since the start of the year.

Earlier, a German report showed the country’s economy grew by a calendar-adjusted 0.9 percent in 2012, well below the 3.1 percent clocked in 2011.

Our Trend Tracking Indexes (TTIs) headed slightly deeper into bullish territory with the Domestic TTI now sitting at +2.78%, while the International TTI has gone vertical to reach +10.34%.

About Ulli Niemann

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