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 10.48 points, or 0.5% to
close at an all-time high of 2,051.80, marking the 43rd time the
index closed in record territory this year.
The Dow Jones Industrial Average (DJI) added 40 points, or 0.2%,
to close at a record level of 17,687.82. The Dow has closed at
record levels 26 times so far this year.
The Nasdaq Composite (RIXF) outperformed other benchmarks,
gaining 31.44 points, or 0.7%, to 4,702.44.
Upbeat housing data, as well as news of a snap election in Japan
and better-than-expected data from Germany might have contributed
to the micro-rally. But overall optimism is also supported by the
fact that global central banks remain highly accommodative,
providing liquidity and keeping key interest rates low.
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, 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.
Separately, 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.
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.
Stocks to watch: Biotechnology stocks surged on Tuesday. Shares
in Actavis Plc(ACT) continued to rise, adding 8.7%, after the
company on Monday said it will buy Allergan Inc. in deal that
values the Botox maker at roughly $66 billion.
Urban Outfitters Inc.(URBN) slumped 6.6% after the company
reported its third-quarter earnings fell to $47.1 million, or 35
cents a share.
Home Depot Inc.(HD)(HD)(HD) shared fell 2.1%, after the company
reaffirmed fiscal-year 2014 guidance and announced earnings per
share of $1.15 in the third quarter.
(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 more than 1%.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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