Stocks Rise On Housing Data And Bernanke Talk; European Markets Climb As Earnings Top Estimates

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of]

US stocks surged Wednesday in a late rally, sending the Dow Industrials to a five-year high as investors welcomed more upbeat housing data and the Federal Reserve chief’s dovish testimony for the second day, reiterating his commitment to monetary stimulus to bolster growth. In other words, the spiked punchbowl will not be watered down as was previously feared.

Earlier, the National Association for Realtors reported contracts to buy existing homes jumped 4.5 percent in January, beating forecasts and setting a positive tone for the day’s trading.

Federal Reserve Chairman Ben Bernanke said the central bank has the necessary tools to scale back monetary stimulus and scotch a rise in inflation expectations in congressional testimony. Last week there have been apprehensions of the Fed scaling back its bond purchase program earlier than expected, but Bernanke effectively put to rest the speculations in the last couple of days.

Also, markets seem to come to the realization that the consequences of sequestration were overblown. Spending has been growing at an annual clip of 14 percent and a two-percent cutback won’t be as dire as previously thought.

On the downside, a Commerce Department report showed orders for US durable goods slumped 5.2 percent in January. However, after taking out transportation items such as airplanes, bookings went up 1.9 percent, suggesting business investments are holding up.

After early choppy trading, the Dow Jones Industrial Average (DJIA) vaulted 175 points while the S&P 500 Index (SPX) rose 19 points to reach last Friday’s level again and recapture its recently lost 1,500 milestone marker.

Treasury prices fell for a second day, pushing yields up after Fed chief Bernanke signaled to lawmakers that the central bank’s loose monetary policies will remain in force to boost the economy and fears about political turmoil in Italy eased after the Mediterranean country managed to sell the targeted amount of government securities for the first time since weekend elections, albeit at a higher yield.

Meanwhile, European stocks surged across the Atlantic as positive US housing data overshadowed fears of political instability in the euro area.

The Stoxx Europe 600 index climbed 0.9 percent to close at 287.17, erasing partially Tuesday’s 1.3 percent loss that had pushed the index to the lowest level in more than two weeks.

Economic confidence in the eurozone rose more than economists had forecast in February, adding to signs the 17-member currency-bloc may have turned the corner to emerge from a six-year old recession. An index of executive and consumer confidence rose to 91.1 in February from a revised 89.5 reading in the previous month, the European Commission revealed.

National benchmark indexes advanced in 14 of the 18 western European markets. Italy’s FTSE MIB index jumped 1.8 percent.

Our Trend Tracking Indexes (TTIs) joined the party and headed higher as well with the Domestic TTI ending the day at +3.06%, while the International TTI settled at +9.04%.

Some food for thought was provided by Zero Hedge in an article titled Founded by Geniuses and Run by Idiots, a worthwhile read.

Contact Ulli

Leave a Reply