Stock indices are called higher this morning in a follow-through rally following yesterday’s strong move to the upside. Today’s surge actually began shortly after the close yesterday when Apple, Inc. announced blowout earnings. Better-than-expected earnings results from Texas Instruments also helped contribute to the gains.
Today, investors are likely to put U.S. Housing Data aside and focus on the plethora of earnings news expected to be released. Demand continues to be high for equities and valuation does not seem to be a problem as momentum continues to spring the three major indices forward. Stocks are expected to maintain their firm tone as long as investors continue to demand higher yields in exchange for the commensurate risk. Look for higher markets until the money inflows dries up or another asset class begins to provide the same reward/risk potential.
Traders should watch the opening to see if investors are willing to chase the market higher this morning. As mentioned earlier, this current surge started almost immediately after yesterday’s close so many investors may be waiting for a dip to re-enter rather than pay up at inflated prices.
Treasury futures are called steady, but may move lower if equity markets continue to post strong gains after the opening. Early session weakness in the equities could support December Treasury Bonds and Treasury Notes, but overall, pressure should be felt because fixed income traders may start asking for higher yields. Unlike the equity market today, Treasuries are likely to react to U.S. Housing numbers. Better than expected reports are likely to push yields up and Bonds and Notes lower.
The U.S. Dollar Index is trading at a 14-month low this morning. The December Euro is posting a strong gain despite efforts to push it lower with comments from Euro Zone finance ministers. This market is nearing the psychological resistance area at 1.50 with no sign of a let up. The December British Pound is showing a gain as traders are discounting the possibility of an extension of the Bank of England asset buyback program. Lower yields in the U.S. are making the December Japanese Yen a more attractive investment. The Yen also got a boost with the Japanese Finance Minister ruled out an intervention.
December Gold is trading sharply higher because of the weaker Dollar. Look for a surge through the all-time high at $1072.00 if the Dollar accelerates to the downside. Traders have been a little hesitant to aggressively buy gold at current levels, but a sharply lower break in the Dollar will give gold investors no choice but to chase it higher.
Speculation, a weaker Dollar and higher equities are expected to continue to push December Crude Oil higher. At this time, the energy markets seem to be divorced from the fundamentals of supply and demand and are instead relying on momentum to drive them higher. Gasoline prices are surging due to inventory drawdowns caused by refinery cut-backs. Continue to look for strong gains and a possible acceleration above $80 this morning.
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