Stocks soaring as tensions abate

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Stocks are rebounding sharply today on hopes that tensions with Russia will abate.

S&P 500 futures are up more than 1 percent, matching gains of more than 2 percent in Europe. Asia was little-changed in the overnight session. Oil, gold, bonds, and the Japanese yen are down across the board as the perception of risk eases.

The S&P 500 fell 0.74 percent yesterday but fought its way back from a loss of as much as 1.3 percent. The benchmark index also managed to close above its 10-day moving average, which suggests that bullish momentum remains intact. If today's gains hold, it would also solidify the perception that the S&P 500 has the strength to remain above the 1850 level that was resistance earlier this year.

Yesterday's drop came after Russian troops occupied Crimea over the weekend, and today's rebound follows a report that the Kremlin is recalling soldiers from military exercises near the Ukraine border. Bigger questions about the political direction of Ukraine and Russian military bases in Crimea remain unresolved.

The tone has been highly bullish aside from those tensions, with capital continuing to stream into equities and economic numbers improving again. Yesterday, for instance, brought better-than-expected manufacturing reports from Europe, China, and the United States.

Private-sector payrolls and service data will be released tomorrow, followed by retailer same-store sales, factory order s and initial jobless claims on Thursday. The crucial non-farm payrolls report comes on Friday morning. Today is the only session of the week without a major economic headline.

While every major sector is positive in the last month, our researchLAB analysis tool shows materials emerging as a new leadership group. Traders have also been looking for value in consumer-discretionary stocks following a weak holiday-shopping season. Companies associated with domestic energy production and casinos have also been strong.

Financials are perhaps the most important sector to watch because they have lagged since December. However, certain names that are most leveraged to conditions in the broader industry--especially financial guarantors and government-sponsored enterprises--have rallied sharply in recent weeks. If that strength spreads to other names it could also help drive the S&P 500 to new highs. Financial guarantors Ambac and MBIA both reported strong quarterly profit yesterday afternoon.

In other company-specific news, RadioShack fell 23 percent after reporting a wider-than-expected loss and announcing that it would close as many as 1,100 stores. AutoZone also climbed about 1 percent after beating expectations.

The euro, Australian dollar, and copper are rebounding this morning as risk appetite returns. The Market Vector Russia exchange-traded fund is also indicated higher by 3 percent. Yesterday it hit a 4-1/2 year low, but optionMONSTER's Chris McKhann spotted put selling that anticipated the rebound.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: SPX

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