[Chart courtesy of MarketWatch.com]
The market quietly opened higher today as the nation is still in shock of the bombings in Boston. Equities snapped back Tuesday after Monday’s nasty sell-off, cheered by better-than-expected March housing starts and a tame reading on consumer prices.
The Nasdaq led the way, rising 1.51%; the Standard & Poor’s 500 Index added 1.46%, rebounding from its biggest drop since November; and the Dow Jones Industrial Average picked up 1.1%. Early data showed NYSE and Nasdaq volume coming in lower than Monday, consistent with the market’s recent pattern of higher-volume declines and lower-volume gains.
All 10 industry groups advanced as raw-materials and consumer-staples companies gained the most, rising at least 1.7 percent thanks to two blue-chip companies announcing better than estimated earnings. Coca-Cola jumped 5.7 percent as Latin American sales volume increased. Johnson & Johnson added 2.1 percent as new drugs and the acquisition of Synthes Inc. boosted sales.
The big economic news of the day was housing. New-home construction in the U.S. advanced in March to the highest level in almost five years. Multifamily building projects climbed to the highest level in more than seven years, giving signs to support economic growth. According to the Commerce Department, housing starts bumped up to an annualized rate of 1.036 million, up from an upwardly revised rate of 939,000 in February.
Most home builder stocks were quiet early Tuesday after Monday’s soft confidence report sank the group sharply. The sector is dealing with rising costs for lumber and other building materials and difficulty in securing buildable lots. Other data showed the cost of living allegedly declined in March, first time in four months as cheaper gasoline and clothing kept inflation low. Factory production unexpectedly dropped, adding to recent signs that manufacturing is cooling.
The International Monetary Fund cut its global growth forecast from 3.5 percent to 3.3 percent this year. It also urged European policy makers to use “aggressive” monetary policy as a second year of contraction leaves the euro area’s recovery lagging behind the rest of the world.
These concerns sent the price of oil down for the fourth straight day. Oil prices dropped to nearly $86 a barrel. They’ve fallen by nearly 10 percent this month due to concerns about the sluggish global economy, while supplies of oil remain ample. The price of gold, however, jumped after its record daily drop in dollar terms on Monday.
With all the mixed data, what is the big picture? There is no clear sign showing the economy is going in the right direction, but at least the Fed is succeeding in pushing the market indexes into the stratosphere. That supports my long-held view that you need to follow the trend as long as it lasts—and—as long as you have an exit strategy in place to head for the sidelines once this rally orgy comes to an end. And it will come to an end; the timing of it is still the unknown.
Our Trend Tracking Indexes (TTIs) participated in the rebound and closed the day as follows:
Domestic TTI: +3.51%
International TTI: +7.18%
I will update and post the latest ETF Model Portfolio report tomorrow morning.