The major averages rallied for a fourth straight week helping nearly all the popular indices hit new all-time highs. Meanwhile, the tech-heavy Nasdaq hit a 13-year high. The strong bull market that we are experiencing continues to be driven by easy money policies from global central banks. After a brief, and healthy, 7.5% pullback that lasted 7-weeks, it is very encouraging to see the major averages quickly trade above their May highs. The bulls showed up after Bernanke did a 180 and said easy money policies are here to stay for the foreseeable future. Remember, the US Fed continues to print $4B/day and other central banks around the world are showing no signs of backing off which has been the single largest catalyst for this very strong bull market.
Stocks ended higher on Monday as investors digest the latest round of economic and earnings data. Overnight, China said its economy matched estimates and grew 7.5% in Q2. In the U.S., retail sales rose by 0.4% in June which was half of the Street’s estimate for a gain of 0.8%. On a more positive note, the NY Federal Reserve’s manufacturing index rose to 9.46 in July from 7.84 in June and topped the Street’s forecast for 5.
Stocks were quiet on Tuesday as the S&P 500 remained perched just below its all-time high. Overnight, economic sentiment in Germany, the ZEW report, slid to 36.3, missing expectations which bodes poorly for Europe’s largest economy. Elsewhere, Eurozone exports fell, also missing estimates and experienced their largest monthly decline since June 2011. In the US, Consumer prices rose 0.5% in June, topping the Street’s estimate for a gain of 0.3%. Industrial production rose by 0.3% in June which was the largest gain in four months.
On Wednesday, stocks were quiet after Bernanke’s annual testimony on Capitol Hill. Bernanke largely reiterated his easy-money stance which was not surprising. Housing starts sank 9.9% in June to a seasonally adjusted rate of 836k. Analysts expected housing starts to rise to a 959k annual rate. The Fed’s Beige Book showed the overall economy increases at a ‘modest to moderate pace.’
THURSDAY & FRIDAY’S ACTION: Stocks Hit New Record Highs After Bernanke Testifies
The S&P 500 and Dow Jones Industrial Average hit new all-time highs on Thursday after investors digested the latest round of economic and earnings data. Bernanke finished his two day testimony on Capitol Hill and reassured investors that the Fed did not have a concrete timetable to taper QE. Weekly jobless claims fell by 24k to a seasonally adjusted 334k, beating estimates for 345k. The Philly Fed index jumped to 19.8 in July vs 12.5 in June, also topping estimates. Finally, Leading Indicators were unchanged at 95.3 in June, hovering near a 5-year high. Stocks were relatively quiet on Friday after Google (GOOG) and Microsoft (MSFT) reported lousy quarterly results.
MARKET OUTLOOK: Stocks Hit New Record Highs
The Fed induced rally is alive and well after Bernanke did a 180 and shifted the narrative back to a world of infinite Fed money. Our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.
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