Daily Market Commentary

Stocks End Flat Ahead of Busy Week

SPX - Stocks are strong 7.29.13STOCK MARKET COMMENTARY:
FRIDAY, JULY 26, 2013

The major averages continue acting very well as they paused last week to digest their four week and very strong rally. It is healthy to see the major averages remain perched near their highs as investors await a slew of data next week (GDP, Fed Meeting, Jobs Report, to name a few).  As we have stated several times in the past, the key driver of this bull market is the easy-money sloshing around the globe from central banks and until this changes, everything else is secondary.


Wall Street was quiet on Monday as investors waited for a rather busy week of earnings data. McDonald’s slid nearly -3% after reporting their Q2 results. Meanwhile, Netflix (NFLX) reported after the close but quickly rebounded which reminds us of Google’s (GOOG) reaction last week. Economic data disappointed. June existing home sales slid -1.2% from a downwardly revised 5.14 million in May to 5.08 million. Existing home sales missed estimates for home sales to increase to 5.28 million. In M&A news, Cisco Systems (CSCO) announced it will acquire the online security firm Sourcefire (FIRE) in a deal worth nearly $2.7 billion in an effort to increase their network security offerings. Separately, gold and silver broke above their respective 50 dma lines for the first this year and supports our notion that a near term bottom may have formed from the June 28, 2013 low.
Stocks were quiet on Tuesday investors digested the latest round of economic and earnings data. U.S. housing prices rose 7.3% in year through May. The Richmond Fed Manufacturing index fell 18 pts to -11 in July, missing estimates for +9. After Tuesday’s close, the focus shifted to Apple’s (AAPL) earnings. AAPL rallied after earnings fell over 20% from the same period last year but beat estimates. 
Stocks fell on Wednesday after a slew of economic and earnings data was announced. Overnight, China’s PMI fell to an 11-month low and missed estimates. Meanwhile, the eurozone is poised to emerge from its recession after Eurozone PMI jumped to an 18-month high. U.S. PMI rose to 53.2 which beat estimates for 52.8. New home sales surged to a 5-yr high in June, even as rates rose. New Home sales vaulted +8.3% to a seasonally adjusted rate of 497k, the highest since May 2008, topping estimates for 482k. Compared to June 2012, new home sales surged a whopping 38.1%, the largest increase since 1992.
THURSDAY & FRIDAY’S ACTION: Stocks Hit New Record Highs After Bernanke Testifies

Stocks opened lower but closed higher on Thursday after taper woes resurfaced as hope spread that the global economy was improving. U.K. GDP rose 0.6% and matched estimates which suggests the worst may be over. Meanwhile, business morale in Germany rose for a third straight month in July. Economic data in the U.S. was mostly positive. Durable goods rose sharply easily beating estimates and weekly jobless claims were nominally higher.  Stocks flat on Friday even though U.S. consumer confidence jumped to a 6-year high and easily beat estimates.

MARKET OUTLOOK: Stocks Perched Below 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.