Equities Leak Higher On Data; Europe Rises On Earnings

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US equities snapped a two-day losing streak to end modestly higher as investors weighed better economic data against average corporate earnings report.

Economic data offered the silver lining after two day’s of hammering. Demand for durable goods jumped 9.9 percent in September, a Commerce Department report revealed.

Also, first time jobless claims came in better than expected, falling by 23,000 to 369,000 in the week ended Oct 20, a Labor Department report showed.

A third report showed pending-home sales rose 0.3 percent in September after a sharp fall in the prior month.

Risk sentiment got a boost after China’s Ministry of Industry and Information Technology said factory output is expected to grow at a faster pace in the final quarter of 2012, while preliminary data from the UK showed the country’s GDP grew by 1 percent in the third quarter, the fastest in five years.

The Dow Jones Industrial Average (DJIA) added 26 points, notching up its first gain in three days. Breadth within the blue-chip index turned positive with 19 of the 30 stocks finishing higher for the day.

The S&P 500 Index (SPX) added 4 points with energy and healthcare pacing the gains and telecommunications and technology lagging among its 10 business sectors.

Speculations about further monetary stimulus by the bank of Japan tempered demand for safer assets Thursday. Yield on the benchmark 10-year Treasury notes climbed four basis points to 1.83 percent while yield on 30-year Treasury bonds rose three basis points to 2.98 percent.

Meanwhile, the US dollar advanced Thursday following unsubstantiated speculations about Fitch Ratings potentially cutting US credit-rating from the current AAA. The ICE dollar index, a barometer of the greenback’s worth against a basket of six currencies, climbed to 80.130 from 79.932.

Better than expected results from the Nordic banks and a surprise one percent UK Q3 GDP expansion pushed European stocks higher on Thursday. The pan-European Stoxx Europe 600 index rose 0.3 percent, snapping a three day losing Streak. Nordic banks DNB SA and SEB AB jumped 2.9 percent and 1.6 percent respectively after reporting higher profits.

The German DAX 30 index rose 0.1 percent, lifted by chemicals company BASF SE. Bayer AG added 0.7 percent over reports the drug maker would collaborate with Qiagen on cancer therapies.

The FTSE 100 index finished flat despite banking and Pharma companies rising on the day. Industry heavyweights Barclays Plc and Standard Chartered Plc rose 1.3 percent and 1.2 percent respectively while AstraZeneca added 0.4 percent after the drug maker stuck to its outlook for the year.

Bucking the trend, the CAC 40 index fell 0.4 percent, dragged down by France Telecom SA. Shares fell 5.2 percent after Q3 profits dropped and the company proposed to cut dividends. Insurance heavyweight AXA SA added 1.04 percent while drug maker Sanofi SA climbed 1.4 percent.

In the ETF space, gold-linked funds surged after the yellow metal reversed its losing streak Thursday, rising $11.40 to $1,713 an ounce. The Van Eck Market Vectors TR Gold Miners ETF (GDX) was one of the top gainers for the day, jumping 3.06 percent on the day. The Van Eck Market Vectors Junior Gold Miners ETF (GDXJ) also pushed higher, rising 1.86 percent for the day.

Homebuilder-linked funds were on the defensive after pending home sales growth came in at 0.3 percent, well below the estimated 2.8 percent. Both the iShares Dow Jones US Home Construction Index Fund (ITB) and the SPDR Homebuilders ETF  fell, slipping by 1.78 percent and 1.12 percent, respectively.

Our Trend Tracking Indexes (TTIs) ended the day at +1.08% (Domestic TTI) and +3.20% (International TTI). For more details, along with updated charts and momentum numbers, please see the latest StatSheet, which I will post shortly.

Disclosure: No holdings in ETFs discussed above

 

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