By Anora Mahmudova and Barbara Kollmeyer, MarketWatch Grantham:
Another 10% run and then S&P will crash
NEW YORK (MarketWatch) -- After a five-day spell when the
S&P 500 moved by less than 0.1% amid low volumes, Tuesday's
lively, trading action amounted to a relative rally for U.S.
stocks.
The benchmark S&P 500 (SPX) rose 0.5% to 2,050, a fresh
intraday record, as traders found stocks attractive again.
Markets could be having a delayed positive reaction to inflation
data, as well as news of a snap election in Japan and
better-than-expected data from Germany.
The Dow Jones Industrial Average (DJI) moved above its previous
closing high, while the Nasdaq Composite (RIXF) outperformed other
benchmarks, gaining 0.6%.
Fawad Razaqzada, technical analyst at FOREX.com, in emailed
comments wrote that investors' insatiable appetite for equities is
understandable to some degree because yields are universally so
low.
"Although the Federal Reserve has ended its quantitative easing
program, some of the other major central banks have expanded
theirs, or at least promised to do so if and when needed,"
Razaqzada wrote.
In economic news, U.S. producer prices rose unexpectedly, in
October, largely because of a spike in an erratic category that
measures profit margins for wholesalers and retailers.
Outside of the U.S., as expected, Japanese Prime Minister Shinzo
Abe announced plans to call a snap election and to delay a planned
sales-tax hike by 18 months, after data showed Monday the country
fell into a recession.
A survey from ZEW showed improved German sentiment on the
economy -- a sign the country's fortunes may be turning around, the
ZEW institute said.
A gauge of confidence among home builders rebounded this month,
led by more optimism over present and upcoming sales of
single-family homes, according to data released Tuesday.
Running out of steam: The U.S. stock market remains on course to
"run deep into bubble territory" before crashing, wrote Jeremy
Grantham, co-founder and chief investment strategist of Grantham
Mayo van Otterloo, in a quarterly newsletter released Monday. He
said bubble territory starts at 2,250 on the S&P 500, roughly
another 10% gain from here. (Also see: A turning point for the
S&P?
http://www.marketwatch.com/story/decision-making-time-for-the-sp-2014-11-17.)
Billionaire investor Carl Icahn told a Reuters conference on
Monday that he's also worried about a market selloff, though not
for the next three to five years. (Read more in Need to Know
http://www.marketwatch.com/story/bone-chilling-temps-put-the-us-and-the-stock-market-in-a-deep-freeze-2014-11-18.)
Mislav Matejka, strategist at J.P. Morgan Cazenove, said in a
note dated Monday it has switched to overweight on the eurozone and
cut U.S. equity exposure to underweight. Among the reasons: The
eurozone has underperformed sharply, and valuations are improving
versus the U.S.
Among Fed speakers, Minneapolis Federal Reserve Bank President
Narayana Kocherlakota is schedule to give a speech on clarifying
monetary policy objectives, in St. Paul, Minn at 1:30 pm Eastern
Time.
Stocks to watch: Home Depot Inc. (HD)(HD)(HD) reaffirmed
fiscal-year 2014 guidance and announced earnings per share of $1.15
in the third quarter. Manchester United Ltd. (MANU) posted lower
revenue across all segments for its September quarter as the team
failed to qualify for the Champions League during one of its worst
seasons in more than two decades.
Dick's Sporting Goods Inc. (DKS) profit dipped due to weakness
in its gold and hunting segments.
Urban Outfitters Inc. (URBN) reported a drop in third-quarter
earnings on Monday, which weighed on shares in late trading.
(Read more about the day's notable stocks in Movers &
Shakers column:
http://www.marketwatch.com/storyno-meta-for-guid.)
Gold jumps as dollar falls: The news from Japan's Abe weighed on
the dollar (USDJPY) versus the yen, which sent gold (GCZ4) prices
higher by about 1.3%.The Nikkei 225 index rebounded 2.2% ahead of
the announcements from Japan's Prime Minister.
European stocks and the euro (EURUSD) rose after ZEW report. Oil
prices (CLZ4) were little changed.
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