Stocks rose modestly on Friday to a two-year high, capping a
week in which the broad indices gained in every session. For the
week, the Dow was up 2.9%, the S&P 500 rose 3.6%, the Nasdaq
gained 2.9%, and the small-cap Russell 2000 Index gained 4.7%.
The financial stocks of the Dow Industrials led the index on
Friday, encouraged by a Federal Reserve decision to allow healthy
banks to raise dividends. This is the first time since the
financial crisis began that the Fed has relented on this issue, and
JP Morgan Chase & Co.
) rose 2.9% and
Bank of America Corporation
) gained 1.9%.
Non-farm payrolls were up more than expected in October, but the
unemployment rate is holding stubbornly at 9.6%.
Better-than-expected corporate earnings were reported by
The Boston Beer Company, Inc.
). And better-than-expected revenues were reported by
Madison Square Garden, Inc.
The greenback rose on the better jobs data with the euro at
$1.4039, down from $1.4209. And the benchmark 10-year note fell
0.5% to yield 2.538%.
On Friday, the Dow Jones Industrial Average rose 9 points to
11,444, the S&P 500 gained 5 points, closing at 1,226, and the
Nasdaq was up 2 points to 2,579. The NYSE traded 1.2 billion shares
with advancers over decliners by 1.4-to-1. The Nasdaq crossed 564
million shares with advancers ahead by 1.3-to-1
December crude oil rose 36 cents to $86.85 a barrel, and the
Energy Select Sector SPDR
) closed at $62.31, up 31 cents to a new two-year high. December
gold rose $14.60 to a record $1,397.70 an ounce. The
PHLX Gold/Silver Sector Index
) gained 0.8 points to a new high at 214.91.
What the Markets Are Saying
Last week, stocks finally broke the impasse that has held the
market for over a year within the tight trading range of S&P
500 1,040 to 1,220. Spurred on by a Republican landslide in
Congress, the Fed's decision to go ahead with quantitative easing
(QE2), solid Q3 earnings gains, and a better-than-expected
employment report, every major index hit new two-year highs.
Thursday's breakout, with a sharp spike up on solid market
breadth and up volume over down volume (9-to-1 on the NYSE and
3-to-1 on the Nasdaq) is proof enough that the advance and breakout
from the Aug. 27 low is the "real deal." Now all three major trends
(near, intermediate and long term) are up, and the next upside
target for the S&P 500 is the August 2008 high of 1,313. For
the Dow, it is 11,933, and the Nasdaq's next target is the December
2007 high at 2,728.
Does that mean that investors should "hock the farm" and put
everything into the stock market? Of course not. Not only does the
principle of diversification argue against such a move, but the
market is now so technically overbought that prudence demands that
we buy into pullbacks rather than chase the crowd. If the new bull
market is to emerge, we will have plenty of time to capture
The breakout's rising tide has driven many quality stocks to new
highs while lifting some of the market's dogs to levels where they
may be finally swapped out for cash or better performers.
Commodities are also in powerful uptrend. Our Trade of the Day
has recommended precious metals stocks regularly with
SPDR Gold Trust
Barrick Gold Corporation
Gabelli Global Gold, Natural Resources &Income
Yamana Gold Inc.
) as names to continue to buy. But at current prices, silver may
even be a better value than gold.
Check out our Trade of the Day for a new silver
Today's Trading Landscape
Earnings to be reported before the opening
AAON, AGA Medical, ATP Oil & Gas, Buckeye Partners, Chindex,
Compass Group, Comverge, Dynegy, EMC Insurance Group, Feihe
International, Frontier Communications, General Steel, Hospitality
Properties, Invesco Mortgage Capital, LMI Aerospace,
Louisiana-Pacific, Mediacom Communications, PDC Energy, Quicksilver
Resources, Republic Airways, Rosetta Resources, South Jersey
Industries, Sysco, TravelCenters of America, Warner Chilcott and
Earnings to be reported after the close include:
Accuray, American Equity Investment Life, American Public
Education, Anadys Pharmaceuticals, Bidz.com, BPZ Energy, Broadsoft,
CardioNet, Chatham Lodging, Clean Energy Fuels, Clear Channel
Outdoor, Convergys, Cousins Properties, Danaos, Diodes, DTX, Eagle
Bulk Shipping, Emdeon, EnergySolutions, EnerNOC, EV Energy,
Financial Engines, Genomic Health, Golden Star Resources,
Healthcare Realty, Himax Technologies, Hologic, Kendle, Keynote
Systems, LDK Solar, MarkWest Energy, McDermott, Metabolix,
Middleby, Mindray Medical, MYR Group, Nationwide Health, Pan
American Silver, Priceline.com, Qiagen, Quality Distribution,
Rackspace, Safe Bulkers, Salix Pharmaceuticals, Silver Wheaton, Sun
Hydraulics, TBS International, TechTarget, THL Credit, UDR, US Auto
Parts, Vaalco Energy, Vivus, Warnaco Group and Wonder Auto
There are no significant economic reports due today.
If you have questions or comments for Sam Collins, please
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