Market Heads North Close To Record High While Economy Continues South

Tue pic

[Chart courtesy of MarketWatch.com]

Stocks surged on Tuesday, with the Dow closing at a record high on a rally in cyclical shares and as earnings season started to heat up. The S&P 500 hit an intraday high of 1,573.89, just below its October 2007 intraday high of 1,576; which is a nice recovery from the losses last week.

Investors are eying the start of earnings season and firm economic readings from overseas. Energy and materials were top performers, drawing support from Chinese inflation that slowed more than expected. Gold settled at its highest level in more than a week; crude oil rose on global supply concerns.

There is clear sign that investors are using market declines as buying opportunities, as the markets return to near-record levels. Stocks got a boost from a promising start to the earnings season. According to Thomson Reuters, about 5 percent of S&P 500 companies have reported results so far, almost three-quarters of them have topped expectations.

Still, profits are seen rising just 1.5 percent from a year-ago quarter, down from estimates in January for growth of 4.3 percent. Alcoa, the first company in the Dow to release results this season, reported earnings that exceeded analysts’ estimates while revenue trailed projections. The company cited lower metal prices and the impact of smelter curtailments in Spain and Italy for the decline in sales. The shares swung between gains and losses of 1.3 percent today before closing unchanged at $8.39.

The market is acting unusual, which is what happens when you live in a Fed centrally planned market environment. Stocks continue going higher despite almost all recent economic data such as unemployment, non-farm payrolls, manufacturing, or vehicle sales having missed expectations.

Adding the economic collapse in Europe, the Chinese slowdown, and the Japanese economic struggle, the market is supposed to be doing badly… a report from China showed inflation slowed last month from a 10-month high. In the U.S., inventories at wholesalers fell unexpectedly in February as uncertainty about fiscal policy kept business spending in check.

Is the U.S. stock market ‘Overvalued, Overbought and Overbullish?’ John Hussman has some thoughts on this always challenging topic.

In other news, J.C. Penney (JCP.N) was the S&P 500’s largest percentage loser, tumbling 12.2 percent to $13.93 after the department store’s board fired Chief Executive Ron Johnson and replaced him with his predecessor Myron Ullman.

Shares of nutritional company Herbalife (HLF.N) fell 3.8 percent to $36.95 after the company announced KPMG had resigned as Herbalife’s independent accountant after one of its senior partners engaged in insider trading in Herbalife stock. Ah yes, that sounds like a new scandal in the making after we’ve had not much activity in that arena.

Our Trend Tracking Indexes (TTIs) inched upward with the Domestic TTI closing at +3.51% while the International TTI ended the day at +6.81%.

I will post the latest update to our model ETF portfolio tomorrow morning.

About Ulli Niemann

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