Stocks hover as tone remains bullish
David Russell | [email protected]
S&P 500 futures are up by more than one-third of a percent but have been weakening in the last hour. Europe is trading similarly and Asian markets rebounded from declines on Monday, led by a 1.5 percent advance in Tokyo.
The S&P 500 has spent more than two weeks refusing to back down from its previous all-time high of 1687 established May. During that time, investors have been preparing for the stream of economic and corporate news that starts to flow today.
The first report across the Atlantic showed European economic sentiment at a 15-month high, although the reading slightly missed forecasts. The Case-Shiller index of home prices and consumer confidence follow at 9 a.m. ET and 10 a.m., respectively.
Economic news intensifies tomorrow with private-sector payrolls, second-quarter gross domestic product, and the Federal Reserve's interest-rate decision. Later in the week we'll also get central bank news from Europe, plus key manufacturing and employment data for the United States.
Despite the S&P 500 holding these long-term highs, it closed below its 10-day moving average for the first time all month yesterday, which could make some traders expect a reversal lower.
There has also been an uptick in mergers and acquisitions in recent weeks, with at least three deals yesterday and a $7.6 billion purchase of hospital chain Health Management Associates by Community Health. Takeover activity has been very quiet for most of the year, so increased volumes could provide another catalyst for the S&P 500 to keep rising.
Our researchLAB stock scanner shows broad strength, with every major sector up in the last month and since the beginning of 2013. Leadership has steadily rotated from one group to another as investors find value across the market. Materials and technology, for instance, are the two strongest sectors in the last week despite being the worst performers on a year-to-date basis.
The last week has also shown a rotation into Spanish banks, among the worst performers in recent years amid worries about Europe's debt problems. Videogames, snowmobile makers, loan-servicing companies, and 3-D printers have outperformed as well.
Commodity trading is more cautious today as copper falls 1.5 percent and oil declines about half a percent. Silver and gold are also down, though most agricultural foodstuffs are mixed.
Foreign-exchange markets paint a similar picture, with the euro up slightly but the Japanese yen stronger. The Australian dollar, which tends to follow commodity prices, is down by more than 1 percent.
In company-specific news, HMA is lower because the takeover price it accepted is lower than some investors had expected. Fertilizer stocks such as Mosaic are also lower after Russia's Uralkali pulled out of a potash cartel, threatening to send prices lower.