Domestic Stocks Rise In Choppy Trade On Some Solid Q2 Earnings But No QE; PGJ Sinks

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Domestic stocks ratcheted higher Monday even though Fed Chairman Ben Bernanke gave no hint that another round of assets purchase is imminent, so investors overcame disappointment and focused on consensus-beating economic reports and positive second-quarter earnings news.

The Dow Jones Industrial Average (DJIA) settled 78.33 points higher in a choppy market after sinking as much as 82 points in early trade and then rising 102 points. Within the 30-component Dow, 26 stocks ended in the expansionary region.

The S&P 500 Index (SPX) added 10.03 points with natural resources, telecommunications and health-care performing the best among its 10 business groups.

Government debt bounced off from almost record lows as demand for safe haven assets eased after the Federal Reserve said June industrial production climbed 0.4 percent against analysts’ 0.3 percent projection.

Bernanke’s testimony before the Senate Banking Committee also kept hopes of further monetary stimulus alive after the central bank chairman said the Fed may consider reducing interest rate on bank reserves, or may purchase mortgage-backed securities, or undertake other appropriate measures to prop up the economy.

The benchmark 10-year Treasury yield advanced two basis points to 1.50 percent after wavering in early trade. Yield on 30-year bond rose three basis points to 2.59 percent in late afternoon trading.

ETFs in the news:

The Van Eck Market Vectors Vietnam ETF (VNM) emerged as one of the top performers on a day when US markets closed higher despite a weak opening. VNM vaulted 3.46 percent after the International Monetary Fund said the ASEAN-5 economies that include Vietnam, Philippines, Indonesia, Malaysia and Thailand would grow at a faster clip of 6.1 percent in 2013 despite volatile capital flows and slowing export growth.

The Invesco PowerShares Golden Dragon Halter USX China Portfolio (PGJ) was among the funds that got hammered on Tuesday. PGJ tumbled 4.03 percent while China-linked funds closed mixed on the day with the iShares FTSE China 25 Index Fund (FXI), the biggest China-related fund, finishing 2.25 percent higher.

Trend wise, our Domestic Trend Tracking Index (TTI) now sits at +2.66%, while its international cousin remains in bear market territory at -2.42%.

Disclosure: No holdings

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