US Indexes Hit Fresh Five-Year Highs; European Stocks Rally As German Sentiment Improves

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

US stocks finished higher Tuesday, sending the Dow Industrials and S&P 500 to new five-year highs, buoyed by a rise in corporate deal making and an improvement in German investor sentiment.

OfficeMax Inc vaulted 21 percent while Office Depot Inc jumped 9.4 percent after the Wall Street Journal reported Monday (a market holiday) that the companies were in advanced merger talks and may announce a deal as early as this week. The latest news, coming close on the heels of last week’s acquisition of Heinz by Warren Buffet and US Airways’ merger with American Airlines parent AMR, shows the mountain of cash corporate America has piled up. They are now pressured into either pursuing deals, raising dividends, or buying back stocks, analysts observed.

On the Economic news front, an index of homebuilders slipped 1.2 percent in February from the more than six-year-high hit in the prior month. A report by the Washington-based National Association of Homebuilders showed the builder confidence index dropped to 46 from 47 in January.

Separately, German investor confidence surged more than forecast by economists in February, rising to a nearly three-year high, signaling the recovery of Europe’s biggest economy from slump.

The Dow Jones Industrial Average (DJIA) rose 54 points while the S&P 500 Index (SPX) climbed 11 points with consumer staples and energy pacing the gains and materials the sole decliner among the index’s 10 major sectors.

Treasury prices slipped, pushing yields on the benchmark 10-year government securities above two percent for a fourth day amid speculations minutes of the US Fed’s latest FOMC meeting, due for release Wednesday, will give further detail on the central bank’s plan to withdraw monetary stimulus.

Meanwhile, the Japanese currency snapped its losing streak, bouncing back against the dollar after Japanese finance minister denied that Tokyo was considering buying foreign bonds to weaken the Japanese currency further.

On the other side of Atlantic, European stocks posted broad-based gains as German investor sentiment rose more than forecast. Among notable movers, shares of Danone surged 5.9 percent after the world’s largest yogurt-maker announced 900 job cuts in Europe as profitability declined in Europe on lower consumption.

Regional benchmark indexes advanced in all 18 European markets, except Iceland.

Germany’s DAX 30 index added 1.6 percent in Frankfurt, helped by a 3.6 percent rise in Bayer.

The CAC 40 index jumped 1.9 percent in Paris, lifted by Carrefour SA. The French supermarket retailer surged 4.6 percent after JP Morgan Cazenove initiated coverage of the firm with an overweight.

The FTSE 100 index added 1 percent as banks pushed higher in London. Barclays PLC and RBS Group PLC added 1.5 percent and 1.7 percent, respectively.

Based on today’s global rally, you’d think all is well and economic problems do not exist any longer. Of course, we all know that’s not true, but right now the trend remains up, and we will continue to participate although in a balanced fashion using a mix of bonds and equities.

Our Trend  Tracking Indexes (TTIs) headed higher as well with the Domestic TTI ending the day at +3.35% while the International TTI rallied to +11.42%.

 

 

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