Melt Up

Melt up.  Stocks ran up for a third straight day on risk-friendly economic releases.  In a relatively quiet day of trading, stocks undaunted by any true hurdles, traded up with all indexes ending in positive territory and the S&P500 reaching a five-month high.


1)  Business investment continues to grow.  Yesterday, the US Census Bureau reported that Durable Goods Orders grew by +0.1% beating estimates and growing for a third straight month.  Roughly 20% of the US GDP is attributed to business investment and Durable Goods Orders is used as a proxy for the aggregate.

2)  Prices paid by producers are increasing but remain under control.  Yesterday’s Producer Price Index showed that prices rose by +2.1% year over year, growing slightly less than expected.  The number shows that inflation is under control for now and that the Fed is not likely to raise rates any time soon.

3)  The UK Parliament voted down a “no deal Brexit”, also known as a “hard Brexit” in which Brexit occurs abruptly without, as the name implies, any deal.  The vote clears a path for further votes on a potential delay or alternative deals.  Hard Brexit would be considered the most tumultuous for businesses and now that it is off the table, businesses can breathe a slight sigh of relief.  The process still remains uncertain and the deadline is fast approaching.  US equity markets are largely ignoring the political uncertainty choosing to crack on.

Stocks, in response to mildly positive economic releases floated with the upward current yesterday. Tepid economic growth is better than no growth and the Fed’s tightening appears to be grounded for now,  clearing the path for risk assets to run up to some important technical levels.  Also grounded is much of Boeing’s 737 Max 8 fleet as the US FAA finally relented to calls to ground the fleet until clarity can be achieved regarding the reasons for the two recent crashes of the aircraft.  Despite the news, Boeing managed to close up by +0.46% in yesterday’s session, though it is still around -10% lower since last weekend’s crash.  As for the numbers, the S&P 500 rose by +0.69% to 2810, the Dow Jones Industrial Average climbed by +0.58% to 25702, the Russell 2000 traded up by +0.39% to 1555, and the NASDAQ 100 ascended by +0.77% to 7256.  All S&P sectors ended in the green led by Health Care. Bonds are still playing it cautiously trading down only slightly yesterday with ten year treasury yields settling at 2.62% and the 2/10 yield curve is slightly steeper at +15 basis points.


This morning weekly Initial Jobless Claims are expected to come in at 225k versus last week’s 223k. Later this morning the US Census Bureau will release New Home Sales which are expected to have grown by +0.2% in January versus the +3.7% growth reported for December.  This morning we will get earnings from Dollar General and Ulta Beauty amongst others.  After the bell earnings will include Oracle, Broadcom and Adobe.

daily chartbook 2019-03-14

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