After Monday’s slump, stocks began their climb back on Tuesday after positive earnings reports helped restore investors’ confidence.
Stocks headed higher on Tuesday, as bargain hunters moved in to “buy the dip” after some positive earnings reports helped relieve the jitters
experienced by investors. Monday’s disappointing purchasing manager’s index reports from Markit Economics and the Institute for Supply Management created quite a wave of anxiety.
One of the more impressive earnings beats came from Michael Kors Holdings (KORS) after the high-end apparel brand reported quarterly earnings of $1.11 per share on revenue of $1 billion, beating estimates of 86 cents per share on revenue of $860 million.
The Dow Jones Industrial Average (DIA) picked up 72 points to finish Tuesday’s trading session at 15,445 for a 0.47 percent advance. The S&P 500 (SPY) climbed 0.76 percent to close at 1,755.
The Nasdaq 100 (QQQ) surged 0.86 percent to finish at 3,470. The Nasdaq 100 remains below its 50-day moving average, which is currently 3,521. The Russell 2000 (IWM) climbed 0.75 percent to end the day at 1,102.
In other major markets, oil (USO) advanced 0.64 percent to close at $34.74.
On London’s ICE Futures Europe Exchange, March futures for Brent crude oil advanced 2 cents (0.02 percent) to $105.41/bbl. (BNO).
April gold futures declined $5.80 (0.46 percent) to $1,254.10 per ounce (GLD).
The transportation sector was back in the air on Tuesday, as the Dow Jones Transportation Average climbed 1.5 percent to 7,135, while remaining below its 50-day moving average of 7,274 (IYT).
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Japanese stocks sank as the yen strengthened to 100.76 per dollar during Tuesday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average took a 4.18 percent nosedive to 14,008 (EWJ). The Nikkei has now slid 14.01 percent from its December 30 close at 16,291, putting the index deeply into a contraction phase and well on the way to the 20 percent threshold for a bear market.
In mainland China, the stock markets were closed for the Lunar New Year. On Thursday, stocks declined after Markit Economics released the final reading on the HSBC China Manufacturing PMI for January, which indicated a drop to a six-month low of 49.5, a worse result than the flash reading of 49.6. A reading above 50 indicates expansion and a reading below 50 indicates contraction. The Shanghai Composite Index dropped 0.82 percent on Thursday to 2,033 (FXI).
On Tuesday, Hong Kong’s Hang Seng Index sank 2.89 percent to 21,397 (EWH) as the stock market re-opened after the four-day, Chinese New Year weekend. Hong Kong investors had their first chance to react to the February 1 release of China’s “official” Purchasing Manager’s Index for January by the National Bureau of Statistics and China Federation of Logistics and Purchasing. The official PMI fell to 50.5 from December’s 51.0.
In Europe, trading got off to a weak start as investors remained shell-shocked from Monday’s stock selloff in the United States. As the day continued, the financial sector picked up the momentum and stocks cut their losses. The Euro STOXX 50 Index dipped 0.05 percent to 2,962 – remaining below its 50-day moving average of 3,052. Its Relative Strength Index is 33.57 (FEZ).
Technical indicators revealed that the S&P 500 remained below its 50-day moving average of 1,810 after climbing 0.76 percent to finish Tuesday’s trading session at 1,755. Its Relative Strength Index (RSI) rose from 31.24 to 36.09. The MACD continues to sink past negative 14, suggesting that the S&P could resume its decline during the immediate future.
On Tuesday, all sectors were solidly in positive territory, except tor the utilities sector, which declined 0.59 percent.
Consumer Discretionary (XLY): +1.23%
Technology: (XLK): +0.38%
Industrials (XLI): +0.64%
Materials: (XLB): +0.88%
Energy (XLE): +1.03%
Financials: (XLF): +0.97%
Utilities (XLU): -0.59%
Health Care: (XLV): +0.98%
Consumer Staples (XLP): +0.53%
Bottom line: Bargain hunters helped boost the major American stock indices on Tuesday, after a number of positive earnings reports helped relieve the anxiety experienced on Monday.
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