By Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks rallied on Tuesday, helped
by data showing a smaller-than-expected trade gap and gains by
health-care stocks following an upgrade for UnitedHealth Group
Inc.
Firmer overseas markets also provided a lift, and traders
absorbed a Federal Reserve official calling for gradual stimulus
reduction.
The S&P 500 (SPX) gained 12 points, or 0.6%, to 1,838,
working to snap the three-day losing streak that it has endured at
the start of 2014. The benchmark index is climbing back toward its
record closing level of 1,848.36 hit Dec. 31.
The Dow Jones Industrial Average (DJI) rose 119 points, or 0.7%,
to 16,544, boosted by a 3.6% jump by UnitedHealth Group Inc.(UNH)
after Deutsche Bank upgraded the Dow component on Tuesday to buy
from hold. The blue-chip index is nearing its own Dec. 31 record
close of 16,576.66.
The Nasdaq Composite (RIXF) advanced on 37 points, or 0.9%, to
4,151.
Tuesday's trade report has made some strategists more optimistic
about U.S. economic growth.
"The U.S. trade deficit is the arcane statistic to watch in
2014, and it opened with a positive whammy, decreasing by 13% from
a revised down deficit last month," said strategists at ING
Investment Management in a note on Tuesday.
"This is a direct benefit to top line GDP growth, and we can
expect positive surprises here as well. So while the S&P 500
began the year with a rough start, it looks like the economy is
doing just fine."
Many strategists say the three-day slide to start the new year
shouldn't have been surprising given the S&P 500's 29.6%
advance in 2013.
"It seems like everyone is up in arms about a 1% pull in after
an almost 30% gain last year, but to me it looks like pretty normal
action," said Scott Redler, chief strategist at T3 Live and T3
Trading Group, in emailed comments early Tuesday. "Most world
markets that ran higher the last 8-10 sessions of 2013 are
experiencing some profit-taking."
Check out MarketWatch's live blog of Tuesday's stock-market
action
* Today's economic news: The U.S. trade deficit fell to $34.3
billion in November, the Commerce Department said on Tuesday. That
was a steeper-than-expected drop and could signal a stronger
economy. Meanwhile, Boston Fed President Eric Rosengren said the
central bank should only wind down its bond-buying program
gradually. San Francisco Fed President John Williams will talk
about the economy and monetary policy in Phoenix, at 2:10 p.m.
Eastern time.
* What strategists are saying: "As a whole, the November trade
report adds upside risk to our 4Q GDP forecast and it now looks
like 4Q real GDP growth is tracking closer to 3.0% than the current
2.5% forecast," said Daniel Silver, a J.P. Morgan economist, in a
note on Tuesday. But overall this week, investors likely will pay
the most attention to Friday's jobs report and Wednesday's release
of minutes from the Fed's Dec. 18 meeting, where the central bank
decided to taper its bond-buying program that's boosted stocks.
* Today's movers and shakers: Netflix Inc. shares fell 4% after
Morgan Stanley cut the video-streaming company to underweight from
equal weight. Shares in Humana Inc. rose 0.2%, erasing early losses
that came after Deutsche Bank downgraded the health insurer to sell
from hold. Read more in the Movers & Shakers column.
* Other markets:European stocks pushed higher Tuesday after the
annual rate of euro-zone inflation fell further below the European
Central Bank's target in December. That triggered some deflation
concerns, but analysts also said it could put pressure on the ECB
to respond with stimulus measures. Asian stocks closed mosly
higher, while gold fell, but oil and the dollar rose.
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