[Chart courtesy of MarketWatch.com]
U.S. equity indexes rebounded from the morning lows to close higher for the first time this week, halting a three-day drop, aided by a stronger-than-expected export growth report out of China and a smaller-than-anticipated rise in domestic jobless claims. The markets were also fueled by some widely followed companies like Tesla and Groupon, which skyrocketed based on their quarterly reports.
The S&P 500 declined 1.1 percent the first three days of the week amid growing speculation the Federal Reserve will pare bond purchases this year as the economy strengthens. Data today showed claims for unemployment insurance edged up 5,000 last week to 333,000, near the consensus of 335,000. The four-week average of claims fell 6,250 to 335,500, the lowest level since November 2007, as labor market conditions continue to improve. The level is consistent with continued moderate payroll gains.
A separate report showed consumers last week were the most upbeat in more than five years. The Bloomberg Consumer Comfort Index rose to minus 23.5 for the period ended Aug. 4, its strongest reading since January 2008. Meanwhile, the Housing Affordability Index fell 10.9 points to 166.0 in June, its lowest level since July 2010. The decline was due to higher mortgage rates and median home prices, which overwhelmed a modest pickup in median family income.
Overseas, stocks in the Eurozone moved higher despite a smaller-than-projected increase in German exports and as European Central Bank economists cut their eurozone economic growth forecasts for this year and next year.
In Asia, data indicated China’s exports and imports exceeded economists’ forecasts, adding to signs that the world’s second-largest economy is stabilizing following a two-quarter slowdown. However, China’s Shanghai Composite Index finished lower as traders awaited some key reports on inflation, industrial production, and lending that are due out tomorrow.
Commodity-related sectors also rallied. Industrials settled higher by 0.4% and Dow component Caterpillar, which does a good portion of its business in China, climbed 1.9%.
Elsewhere, the energy sector ended with a gain of 0.6% even as crude oil slumped 0.5% to $103.85 per barrel. Discretionary shares also contributed to the rebound as retailers outperformed.
Although most cyclical sectors registered gains, financials trailed behind the broader market. JPMorgan Chase shed 0.9% after the company said it is being investigated by the U.S. Attorney’s Office for Eastern District of California over its mortgage-backed securities offerings.
Our Trend Tracking Indexes (TTIs) recoverd as well and headed slightly higher with the Domestic TTI ending the day at +3.64% while the International TTI rallied to +7.17%.
For the latest momentum numbers and charts, please review the most recent StatSheet, which I will post a little later on.