While a downbeat Empire State Manufacturing Survey turned out to a rancid, late Valentine for the stock market, the Dow was the only index to gag.
The stock market shrugged off the New York Fed’s disappointing Empire State Manufacturing Survey for February. The survey’s headline general business conditions index fell eight points to 4.5. Economists were expecting a less-significant decline to 9.0. Despite the drop, any reading above zero indicates expansion. The obvious conclusion was that manufacturing expansion in the state of New York turned out to be less robust than expected. The Dow Jones Industrial Average was the only major American stock index which declined following the report’s release.
The Dow Jones Industrial Average (DIA) lost 23 points to finish Tuesday’s trading session at 16,130 for a 0.15 percent decline, although it remained 29 points above its 50-day moving average of 16,101. The bullish, inverse head-and-shoulders pattern on the Dow chart remains intact. The S&P 500 (SPY) rose 0.12 percent to close at 1,840.
The Nasdaq 100 (QQQ) climbed 0.42 percent to finish at 3,679 – reaching its highest level since July of 2000. The Russell 2000 (IWM) jumped 1.07 percent to end the day at 1,161.
In other major markets, oil (USO) soared 2.09 percent to close at $36.66.
On London’s ICE Futures Europe Exchange, April futures for Brent crude oil advanced $1.43 (1.41 percent) to $110.61/bbl. (BNO).
April gold futures advanced $22.10 (1.70 percent) to $1,322.20 per ounce (GLD).
The transportation sector took on water during Tuesday’s trading session, as the Dow Jones Transportation Average sank 1.03 percent to 7,231, dropping below its 50-day moving average of 7,276 (IYT).
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Japanese stocks soared as the yen weakened to 102.74 per dollar during the last 75 minutes of Tuesday’s trading session in Tokyo. The yen fell after the Bank of Japan announced that it will double the size of its lending facility, by which banks are able to borrow money at extra-low interest rates. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average jumped 3.13 percent to 14,843 (EWJ).
The People’s Bank of China surprised many analysts on Tuesday by withdrawing the equivalent of $7.9 billion from money markets. The PBOC was apparently afraid that the month of January might have brought too much liquidity, as loans by banks and shadow banking enterprises soared to their highest monthly levels in four years. The seven-day bond repurchase rate had fallen below 4 percent, indicating an extraordinarily high degree of liquidity. During June’s liquidity scare, the seven-day repo rate was nearly 10 percent. The Shanghai Composite Index fell 0.77 percent to 2,119 (FXI). Hong Kong’s Hang Seng Index advanced 0.23 percent to 22,587 (EWH).
In Europe, disappointing earnings reports from the retail sector offset the good news from the European Automobile Manufacturers Association (ACEA) that new car registrations in the 28-nation European Union surged 5.5 percent in January. Nevertheless, January’s 935,640 new registrations brought the second-lowest reading for the month of January since the ACEA began the series in 2003, with the enlarged European Union.
The Euro STOXX 50 Index finished Tuesday’s session with a 0.05 percent dip to 3,117 – while remaining above its 50-day moving average of 3,055. Its Relative Strength Index is 60.52 (FEZ).
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,812 by finishing Tuesday’s trading session with a 0.12 percent advance to 1,840. Its Relative Strength Index (RSI) rose from 60.18 to 60.70. The MACD is climbing above the zero line, suggesting that the S&P could continue its advance during the immediate future.
On Tuesday, most sectors were in positive territory. The industrial and consumer staples sectors were the only decliners, retreating by 0.08 percent and 0.57 percent, respectively.
Consumer Discretionary (XLY): +0.12%
Technology: (XLK): +0.06%
Industrials (XLI): -0.08%
Materials: (XLB): +0.07%
Energy (XLE): +0.45%
Financials: (XLF): +0.18
Utilities (XLU): +0.35%
Health Care: (XLV): +0.93
Consumer Staples (XLP): -0.57%
Bottom line: The Dow Jones Industrial Average was the only major American stock index to decline following the release of the New York Fed’s Empire State Manufacturing Survey for February. The other indices continued to head skyward.
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