The Dow’s eight-session winning streak is making
The Dow’s eight-session winning streak is making headlines, as is the fact that the index is now also above its January 2010 highs (it was the last of the majors to achieve this milestone). Furthermore, bullish followers of the long-standing Dow Theory rejoiced today, as the 30-stock Dow Industrial Average has now confirmed the bullish move by the Dow Jones Transportation Average (until now, there had been a divergence between the two). The Industrial Average has twenty stocks, among them FedEx, which reported today that its fiscal third-quarter profit had more than doubled and which sees a recovering economy. The Dow Jones Transportation Average has been on a tear, closing higher for 11 consecutive sessions, something we have not seen since 1993.
With bullishness hitting extremes and much talk about a new bull market, some market commentators speculate that too much good news could actually be bad for stocks because of the rising risk the Fed might be forced to raise interest rates. Let’s look at some recent good news:
The Dow has hit an 18-month high; the Philadelphia manufacturing index showed growth; recent jobless claims declined by 5,000 last week yet inflation at the consumer levels (consumer price index) has been flat; FedEx announced excellent profits and Nike also reported better-than-estimated earnings; DuPont expects earnings per share to grow 20% annually until 2012. Yet the S&P 500 struggled to advance today. Market observers state that a rumored rise in the discount rates was to blame. The Fed has already announced one increase in its discount rate (which it charges banks for direct loans) on February 18.
Some of the weakness in the S&P 500 stemmed from US dollar strength which depressed commodities. Also a drag was Dow component Caterpillar (the world’s largest maker of construction and mining equipment). The company announced that rolling three-month global retail sales for its machinery and engines line of business were down 20%.
No further economic data releases scheduled for this week. Tomorrow is an options expiration session.
By noreply@noemail.com (HGH Press)
