Investors Don’t Fear The Taper

Investors sent the S&P 500 to a record-high close despite speeches by Federal Reserve officials hinting that the taper could begin this month.  

Monday’s trading action suggested that investors finally overcame their fear that the FOMC could vote to taper the Federal Reserve’s bond-buying on December 18. The S&P 500 reached a new, record-high close, despite the fact that three Federal Reserve officials gave speeches on Monday, suggesting that the tapering program could begin this month. Dallas FedHead Richard Fisher, Richmond FedHead Jeffrey Lacker and St. Louis FedHead James Bullard gave speeches on Monday, wherein each discussed the possibility that the cutbacks to the Fed’s bond-buying could begin in December.
 
Stocks maintained their momentum from Friday’s rally, which resulted from better-than-expected results from the November non-farm payrolls report and the preliminary Thompson Reuters/University of Michigan Consumer Sentiment Index for December. Although economists were expecting to see an increase to 75.5 from November’s 75.1, the index skyrocketed to 82.5.
 
The Dow Jones Industrial Average (DIA) picked up 5 points to finish Monday’s trading session at 16,025 for a 0.03 percent advance. The S&P 500 (SPY) rose 0.18 percent to a new record-high close at 1,808.37.
 
The Nasdaq 100 (QQQ) advanced 0.34 percent to finish at 3,516 – its highest close since September of 2000. The Russell 2000 (IWM) declined 0.17 percent to end the day at 1,129.
 
In other major markets, oil (USO) declined 0.40 percent to close at $34.91.
 
On London’s ICE Futures Europe Exchange, January futures for Brent crude oil declined $2.42 (2.18 percent) to $108.80/bbl. (BNO).
 
February gold futures advanced $10.70 (0.87 percent) to $1,239.70 per ounce (GLD).
 
Transports were flying with the satellites on Monday, as the Dow Jones Transportation Average (IYT) climbed 0.36 percent.
 
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Japanese stocks made enormous gains, as the yen weakened to 103.08 per dollar before Monday’s closing bell in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). Mazda shares skyrocketed 2.97 percent on the Tokyo Stock Exchange. The Nikkei 225 Stock Average soared 2.29 percent to 15,650 (EWJ).
 
Stocks advanced modestly in China after the General Administration of Customs reported that the nation’s exports increased 12.7 percent on a year-over-year basis, beating economists’ expectations of a 7 percent rise. The Shanghai Composite Index rose 0.05 percent to 2,238 (FXI). Hong Kong’s Hang Seng Index advanced 0.29 percent to end the day at 23,811 (EWH).
 
In Europe, the major stock indices managed to advance, despite a disappointing report from Destatis, which indicated that Germany’s industrial production declined 1.2 percent in October. The Euro STOXX 50 Index finished Monday’s session with a 0.29 percent advance to 2,988 – while failing to reach its 50-day moving average of 3,018. Its Relative Strength Index is 42.15 (FEZ).
 
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,754 after advancing 0.18 percent to finish Monday’s session at a record-high close of 1,808.37. Its Relative Strength Index climbed from 61.56 to 62.77. Although the MACD remains below the signal line, it is on a level trajectory, which would suggest that the S&P will continue to hold near 1,808 during the immediate future.

On Monday, most sectors advanced, except for the consumer discretionary and utilities sectors, which declined by 0.08 percent and 0.60 percent, respectively.
 
Consumer Discretionary (XLY):  -0.08%       
 
Technology:  (XLK):  +0.32%
 
Industrials (XLI):  +0.26%
 
Materials: (XLB):  +0.52%
 
Energy (XLE):  +0.14%
 
Financials: (XLF):  +0.42%
 
Utilities (XLU):  -0.60%
 
Health Care: (XLV):  +0.20%
 
Consumer Staples (XLP):  +0.35%
 
Bottom line:  Investors seemed unfazed by three speeches from Federal Reserve officials who suggested that the taper of the Fed’s bond purchases could begin this month, as the S&P 500 reached a new record-high close on Monday.  

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