Thursday, February 17, 2011
Stock Market Commentary:
Stocks were quiet on Thursday after jobless claims rose more than expected last week and the consumer price index (CPI), which is used to measure inflation, continued to rise last month. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages continue marching higher. The fact that the major averages bounced back sharply after a very brief pullback in January illustrates how strong this 25-week rally actually is.
Jobless Claims, Inflation, Leading Indicators, & Philly Fed Survey Are Released:
Before Wednesday’s open, the Labor Department said initial jobless claims rose by 25,000 to 410,000 last week which topped the Street’s estimate for a gain of 17,000. The Labor Department also released the seasonally adjusted consumer price index which rose by +0.4% last month from December. On a year-over-year basis, prices swelled 1.6% before seasonal adjustments compared to the same period in 2010. However, core inflation, which removes food and energy prices and is considered the Fed’s preferred measure of inflation, increased by +0.2%. The report also showed that the annual underlying inflation rate stood at 1.0% in January which is still under the Fed’s target for 2.0%. At 10AM EST, leading economic indicators showed the economy continued to grow and the Philly Fed survey surged to 35.9, easily topping expectations.
Market Action- Confirmed Rally; Week 25
It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.