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
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
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
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
that anticipated the rebound.
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