Thursday, December 10, 2009

MarketWrap for 12/10/09-Stocks move back into the black for the month...

The Dow Jones Industrial Average rose 68.78, or 0.7 percent, to 10,405.83, pushing it back into the winning column for the month.  The Standard & Poor's 500 index rose 6.40, or 0.6 percent, to 1,102.35, while the NASDAQ composite index rose 7.13, or 0.3 percent, to 2,190.86.   The gains in stocks came as the dollar stabilized and were led by gains of 1% each in health-care and consumer-discretionary sectors.  For months stocks and the dollar have moved in the opposite direction.  Record-low U.S. interest rates have pressured the dollar for much of this year, leading investors to buy assets like stocks and commodities that can earn better returns than cash.  In recent weeks, signs of improvement in the economy have brought expectations that the Federal Reserve might raise interest rates sooner than expected.  That would strengthen the dollar.   A weaker dollar is lifting demand for U.S. goods, which become less expensive for foreign buyers when the greenback falls. The Commerce Department said a rise in exports helped narrow the nation's trade gap to $32.9 billion in October.  Economists had been expecting an increase.  Exports rose 2.5 percent which is the sixth straight monthly increase.  Investors will likely be paying close attention to a policy statement from the Federal Reserve when it determines interest rates next week.

In other trading, Treasury prices fell for a second day after an auction of 30-year bonds drew weak demand. The slump in prices for long-dated bonds pushed yields higher. The yield on the benchmark 10-year Treasury note rose to 3.48 percent from 3.44 percent late Wednesday, while the yield on the 30-year bond rose to 4.49 percent from 4.42 percent.

Gold rose after a four-day slide, while oil fell for a seventh day, losing 13 cents to settle at $70.54 a barrel.

As we mentioned to our institutional customers this morning, the S&P 500 Index still remains in an up trending wedge however for the last two weeks the index has stalled under a secondary downtrend line. While two weeks of stalling at resistance is not a major concern yet it does at very minimum raise a cautionary tone given the S&P 500 has had such a large, uninterrupted advance. Weekly momentum as measured by the Relative Strength Index (RSI) has remained neutral while the S&P 500 has rallied. However until near term supports are broken near 1,050 then 1,026 it is hard to get too negative. So to reiterate some yellow lights are flashing but the bottom line is the trend is still up and remains intact and only a move below the 1,050 then 1,026 level would be viewed as a negative. From a portfolio management perspective we would tighten up stops on profitable positions reduce long side exposure if the above mentioned levels are violated.  

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