Stocks continued to climb higher on Tuesday, as investors awaited a pep talk from the new Fed Chair, set for Wednesday afternoon.
Stocks continued on their upward trajectory during Tuesday’s trading session, despite a disappointing report on February housing starts from the Commerce Department’s Census Bureau. Economists had hoped to see that new home starts were proceeding at a seasonally-adjusted annual rate (SAAR) of 915,000. Unfortunately, report indicated a SAAR of 907,000. The February estimate declined 0.2 percent from the revised January estimate of 909,000. The February 2014 SAAR was 6.4 percent below the February 2013 annual rate of 969,000. On the bright side, building permit applications rose 7.7 percent above January’s rate, to a SAAR of 1,018,000.
Despite the disappointing news on the housing front, investors remained enthusiastic ahead of Wednesday’s release of the FOMC Statement at the conclusion to the Federal Open Market Committee’s monetary policy meeting on Wednesday afternoon. Newly-appointed Fed Chair, Janet Yellen, will hold her first press conference at 2:30 and answer questions about the Fed’s new approach to “forward guidance” and what that will tell us as to how long we can expect the federal funds rate to remain below 0.25 percent. New York Fed Chair Bill Dudley has already hinted that the Fed will likely raise the federal funds rate from its current 0 – 0.25 percent range at some point in mid-2015.
The Dow Jones Industrial Average (DIA) picked up 88 points to finish Tuesday’s trading session at 16,336 for a 0.55 percent advance. The S&P 500 (SPY) surged 0.72 percent to 1,872.
The Nasdaq 100 (QQQ) jumped 1.20 percent to finish at 3,706. The Russell 2000 (IWM) soared 1.41 percent to 1,205.
In other major markets, oil (USO) climbed 1.22 percent to close at $35.08.
On London’s ICE Futures Europe Exchange, May futures for Brent crude oil advanced 39 cents (0.37 percent) to $106.63/bbl. (BNO).
April gold futures declined $17.30 (1.26 percent) to $1,355.60 per ounce (GLD).
The transportation sector was back in in the jet stream during Tuesday’s trading session, as the Dow Jones Transportation Average climbed 0.53 percent to 7,582 (IYT).
In Japan, the exchange rate for the yen remained the dominant factor in stock market activity. Japanese stocks climbed as the yen weakened to 101.86 per dollar during the last hour of Tuesday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average surged 0.94 percent to 14,411 (EWJ).
Stocks in mainland China were relatively unchanged on Tuesday, while investors in Hong Kong were a bit more upbeat as the Crimean situation has yet to result in a serious crisis. The Shanghai Composite Index advanced 0.08 percent to 2,025 (FXI). The move was obviously not enough to break the “neckline” of the bearish, head-and-shoulders pattern on the Shanghai Composite’s chart. Hong Kong’s Hang Seng Index climbed 0.51 percent to 21,583 (EWH).
European stocks advanced after the European Automobile Manufacturers Association (ACEA) reported that new passenger car registrations jumped 8.0 percent in February for the sixth consecutive monthly increase. During the first two months of 2014, new car registrations rose by 6.6 percent. The Euro STOXX 50 Index finished Tuesday’s session with a 0.81 percent surge to 3,073 – which was not enough to reach its 50-day moving average of 3,087, although it briefly broke above that level to reach a high of 3,096. Its Relative Strength Index rose from 44.23 to 48.29 (FEZ).
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,830 on Tuesday, after a 0.72 percent advance to 1,872. Its Relative Strength Index (RSI) climbed from 55.17 to 59.62. The MACD is rising toward the signal line, suggesting that the S&P could continue its advance during the immediate future.
On Tuesday, all sectors were solidly in positive territory except for the utilities sector, which declined 0.15 percent.
Consumer Discretionary (XLY): +0.44%
Technology: (XLK): +1.30%
Industrials (XLI): +0.54%
Materials: (XLB): +0.57%
Energy (XLE): +0.84%
Financials: (XLF): +0.50%
Utilities (XLU): -0.15%
Health Care: (XLV): +1.07%
Consumer Staples (XLP): +0.21%
Bottom line: Despite a disappointing (but unsurprising) report on February housing starts, investors remained upbeat ahead of Wednesday’s release of the latest FOMC Statement and Janet Yellen’s first press conference as Fed Chair.
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