Investors Send The S&P 500 To New Record High

The Small Business Optimism Index finally escaped from a rut of nihilism to reach a better-than-expected reading of 92.1 for April. The result was above the recovery average of 90.7, beating economists’ expectations of an advance from 89.5 in March to 90.5 in April. Investors responded enthusiastically to the report, sending the S&P 500 to new record intraday and closing highs.

The Dow Jones Industrial Average (DIA) jumped 123 points to finish Tuesday’s trading session at 15,215 for a 0.82 percent advance. The S&P 500 (SPY) surged 1.01 percent to set a new record-high close at 1,650.34. The S&P also reached a new intraday record high of 1,651.10.

The Nasdaq 100 (QQQ) rose 0.47 percent to 2,996. The Russell 2000 (IWM) jumped 1.25 percent to a new record high close at 985.96.

In other major markets, oil (USO) declined 0.89 percent to close at $33.56.

On London’s ICE Futures Europe Exchange, June futures for Brent crude oil declined by 11 cents (0.11 percent) to $102.53/bbl. (BNO, USO).

June gold futures declined by $10.70 (0.75 percent) to $1,423.60 per ounce (GLD).

Transports accellerated on Tuesday, with the Dow Jones Transportation Index (IYT) surged 1.85 percent.

European stocks made a strong afternoon advance on Tuesday. Stocks initially declined after a report indicated that German investor confidence remained in the doldrums. Investor enthusiasm was sparked in the afternoon, when the Eurogroup finance ministers, meeting in Brussels, discussed creating a common banking union which would include a backstop mechanism for handling failed banks. The Euro STOXX 50 Index finished Tuesday’s trading session with a 0.66 percent advance to 2,795 – remaining above its 50-day moving average of 2,676.

Japanese stocks made a slight retreat on Tuesday as investors went on a wave of profit-taking as many stocks began to appear overbought following the recent rally after the exchange rate for the yen fell below a penny. A weaker yen results in more-competitive prices for Japanese exports in foreign markets (FXY). The Nikkei 225 Stock Average dipped 0.16 percent to 14,758 (EWJ).

In China, stocks declined after JPMorgan Chase lowered its second-quarter GDP forecast to 7.8 percent to 8.0. Monday’s disappointing report on fixed-asset investment was just the latest in a string of economic reports which demonstrate an economic slowdown in China. The Shanghai Composite Index sank 1.11 percent to 2,217 (FXI). Hong Kong’s Hang Seng Index declined 0.26 percent to 22,930 (EWH).

Technical indicators reveal that the S&P 500 remains far above its 50-day moving average of 1,574 after closing at 1,650.34 – motivating bears to hope that we are watching the formation of a head-and-shoulders pattern, which would signal a decline. Its Relative Strength Index ticked upward from 67.37 to 71.49 – beyond the threshold level of 70, which most investors consider an “overbought” signal. The MACD remains above the signal line, suggesting the likelihood of a further advance.

For the day, all sectors finished in solidly positive territory. The big winners were the financial and energy sectors. The technology sector was the laggard of the group, with a 0.32 percent advance.

Consumer Discretionary (XLY): +1.02%

Technology: (XLK): +0.32%

Industrials (XLI): +1.23%

Materials: (XLB): +1.24%

Energy (XLE): +1.42%

Financials: (XLF): +1.71%

Utilities (XLU): +0.68%

Health Care: (XLV): +1.01%

Consumer Staples (XLP): +1.19%

Bottom line: A jump in the Small Business Optimism Index for April kept those “animal spirits” alive on Wednesday, sending the S&P 500 to new record intraday and closing highs.

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