Another Higher Open to Higher Close
- Stocks hit their stride on the way to quarter end and the jobs report.
- ADP jobs survey is good enough at 201K private jobs.
- Mortgage applications fall as mortgage rates rise.
- Inflation expectations jumping as the fourth Fed official comes out against QE.
- Dollar LIBOR slips, indicating no real crisis is expected.
- History proved up again: Average GDP growth the past decade is 1.7% per year as regulations and government spending explode over that period.
- Nice moves abound as the run to the quarter end accelerates again.
MARKET SUMMARY
Another higher open to higher close.
Once again it was not a huge day but it was very steady as on Tuesday. Stock futures gained ground all morning, setting stocks for an upside open for the second straight session. Stocks did indeed open higher and just as on Tuesday, they climbed through the session and closed near the session highs. Not great gains as noted, but steady: NASDAQ up 20 points (0.7%), SP500 9 points (0.7%), DJ30 0.6%, SP600 1.3%.
Importantly, SP500 and SP400 broke to new rally highs, eclipsing the February peak. DJ20 transports broke to a new rally high but could not quite hold it to the close. The Dow 30 came close but no cigar. SP500 and NASDAQ? Well, they are still below the early March peak; it would appear that the smaller, economically sensitive (domestically sensitive) stocks are factoring in some pretty good economic times here at home.
That somewhat belies the economic data the past couple of months as the government s reports show some backsliding in the recovery though manufacturing remains in a solid expansion. Wednesday saw ADP private jobs hit 201K, short of the 210K expected while February was written down to 208K from 217K. So the numbers were down but the trend is still rather clear. Indeed, the 3-month average for ADP is over 200K. In March 2010 the 3-month average was 1K. Yes the trend is in the right direction.
Mortgage applications fell 7.5% for the week as refinancing fell 10%. A 12BP climb in the 30 year mortgage rate to 4.92% is blamed for the decline. Higher rates brought more into the market a month or two back and now they are all in, so to speak.
Investors ignored any deficiencies in the data and rallied stocks from the open through a slow afternoon and decent finish. The end of quarter, tape-painting rally continues nicely, and as per the plan we picked up a few good names that can run fast and took some gain off the table as well. Hard to complain about the action as the pre-quarter end run got back into its stride after a brief pause.
Jobless claims, the final warm up for the Friday jobs report. Last day of the quarter followed by the first. We could see another upside session Thursday and then perhaps some more upside to start Friday with the new quarter and new money. After that, well, we think there could be some profit taking.
That doesn t mean we think a rollover, but after a good run to the prior highs and in some cases through them, investors may want to take some off the table before the weekend. Two weeks of solid recovery to the weekend likely means some giveback.
Don t want to sound too flippant or matter of fact, but this is what we have been looking for and it is coming together. Nice surges on Wednesday as our plays stretch to the upside. We plan on letting them run and then taking some gain just as we have said all week. Not a wholesale closure of positions, just the time to take some profit off the table after a good run and the end of the quarter that we have attributed as one of the main drivers of the move.
We picked up some more positions Wednesday in stocks such as PNRA and DECK that can sprint nicely and if they catch the wind Thursday and Friday could have built in some nice gain already. As for Thursday, we are not that wild about more positions. Won t turn down nice juicy ones but it is time to be patient and selective. Indeed on Wednesday we let some go by that hit the buy point but just didn t look to have the juice to put in a good run through Friday.
Again we are not predicting a rollover, just some profit taking that could lead to some better buys down the road. Thus we take some gain on good moves and then look at what develops for new positions IF the rally continues. For now the market keeps building in more easy money so it continues to rise despite world turmoil and softening US economic data. Ride her until she bucks you as Roy McAvoy said in Tin Cup.
