Morning Watch, Nov. 22
November 23, 2009
Stocks rally on gains overseas and comments from a Fed leader that pushed the dollar lower. Traders are expecting low volumes this week due to the fact Thursday is a holiday and the stock market will be close all day and part of the day on Friday. Low volumes can create volatility, but the general feeling is that traders will be taking a break during the holiday season, accepting the solid gains seen since March.
Earnings season is dying down with Hewlett-Packard (HPQ) the lone Dow ($INDU) component left to report. HPQ will release its quarterly results after the bell and the stock is 1.5 percent ahead of this news. HP shares have been on a nice trend since the March lows, nearly doubling in price with the stock currently trading near $51.
St. Louis Fed President James Bullard helped the bulls after making comments that pushed the dollar lower over the weekend. Mr. Bullard stated that the U.S. should continue to buy mortgage-backed securities past the deadline established for the end of the first quarter 2010. Last Friday, the euro-zone central bank announced plans to tighten credit. Mr. Bullard's comments let traders know that at least some Fed members are not ready to start raising rates and tightening monetary policy.
Indices in Europe are seeing solid gains Monday, up more than two percent. This would end a four-day losing streak for shares in Europe. Asian stocks ended in the black with the Hang Seng up 1.41 percent. Reports of higher growth prospects for China led to gains in the region and provided strength across the globe.
In economic news, existing home sales rose sharply in October, up 9.4 percent to an annualized figure of 6.10 million units. This was well above estimates for a figure of 5.7 million units and helps offset the weak housing starts report released last week. The first time home buyer credit has benefited the sector. This program was extended recently, but the amount of available candidates is falling, which is likely to ease sales going forward.
After failing to hold its break of 1,100 last week, the S&P 500 ($SPX) is back above this point Monday. Looking at a daily chart of the SPX, we see that the index has been stair-stepping higher, so maybe this will be the week the break holds. However, the general feeling is that the major market indices will move sideways throughout the rest of 2009 as traders secure profits.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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