Stocks are higher this morning, bouncing from key support amid
strong economic news from Europe.
S&P 500 futures are up more than half a percent and near their
highs of the session. Most indexes across the Atlantic are surging
by more than a full percentage point after purchasing managers
indexes showed accelerating growth. Asia was weak overnight as both
Tokyo and Shanghai fell 1.6 percent.
Attention now focuses on the Federal Reserve's monetary
announcement on Wednesday afternoon. While many economists expect
the central bank to reduce monetary stimulus, the matter has been
thoroughly discussed for the last six months and now seems to be
fully priced in. The overall backdrop has been extremely benign,
with improving economic growth, minimal inflation, and ample cash
on the sidelines.
The technical situation is also positive: The S&P 500 made an
all-time high of 1813 the day after Thanksgiving, pulled back, and
ended last week at the same 1772 level where it struggled between
Oct. 29 and Nov. 12. That suggests old resistance has become
support, consistent with a bullish uptrend.
Strength has been broadly spread across most sectors, but has been
recently shifting back in favor of economically sensitive sectors
including materials, consumer discretionaries, and industrials. Our
scanner also shows international stocks gaining momentum in the
last week following months of underperformance.
The only items on today's calendar are the New York Fed's Empire
manufacturing index at 8:30 a.m. ET and national industrial
production 45 minutes later. While the Empire number is unlikely to
affect sentiment, it is a useful forward-looking indicator on the
Natural gas is the biggest mover in commodity markets, falling
almost 3 percent after a strong rally in the last month. Brent
crude oil rose about 1.4 percent, while West Texas Intermediate is
up about 0.65 percent--price action that would typically support
refinery stocks. Copper is also inching higher while precious
metals and commodities are down.
The euro is climbing across the board after those strong economic
data. Most other currencies are little-changed.
In company-specific news, AerCap Holdings is surging 25 percent
after agreeing to purchase International Lease Finance from
American International Group $5.4 billion in cash and stock. AIG
advanced 3 percent, as well.
I am long AIG.
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