U.S. Markets Soar on Consumer Confidence Data

[Excerpted from Bill Cara's Daily Report]

Notable spin surrounded the release of Consumer Confidence data,taking what looked like a negative opening to soaring heights throughthe day in US equity markets. Most of the gain happened in the first 90minutes, followed by churning action until the last ten minutes whenthe markets closed with a strong finishing kick.At the close, for only the second time in the past seven sessions,there were gains. In fact, the DJIA (8,473.49 +196.17 +2.37%), S&P500 (910.33 +23.33 +2.63%) and NASDAQ Composite (1,750.43 +58.42+3.45%) all were up. But, again, the volume was low.

The Toronto Composite (10,285.9 +216.4 +2.15%) and Toronto Venture Board (1,097.16 +0.73 +0.07%) closed higher for the fourth time in five for the Toronto index in this post-holiday week in Canada, and the fifth straight for the Venture Board.

In NY, the Industrial (XLI +3.6%), Consumer Discretionary (XLY +3.4%), and Financial sectors (XLF +3.3%) were leaders. Healthcare (XLV +0.9%) and Consumer Staples (XLP +1.3%) were laggards.

Among industry groups, REITs ($DJR +6.4%) were strongest, followed by Retailers ($RLX), Banks ($BKX) and Computer Hardware ($HWI), all up +4.0%. Goldminers ($XAU +0.1%) were the laggards.

The Cara 100 company stocks that lifted the most were Brazil’s Voorantim (VCP +8.7%), Canada’s Royal Bank (RY +7.0%) and Research In Motion (RIMM +6.6%) plus a couple US retailers Kohl’s (KSS +7.0%) and JC Penny (JCP +6.5%). Of 16 losers, the worst was First Solar (FSLR -6.4%), following a strange interview on Bloomberg with a German analyst who seemed to be painting the company with faint praise, and South Korea’s Kookmin Bank (KB -4.1%), which was a reaction to the week’s nuclear related events in North Korea.

The latter also initially hammered down the Won and the Japanese Yen, causing a big lift to the $USD that softened notably as the session went on (+0.12% to 80.13). The Yen closed a tad lower after gaining strength during the session (105.29 -0.21 -0.20%). The Euro was quiet (139.89 -0.05 -0.04%), as was the Pound (159.31 +0.12 +0.08%), while the Cdn Loonie (89.61 +0.44 +0.49%) and Aussie Dollar were very strong.

Earlier Wednesday, prices were, especially for Hong Kong and India, much higher across equity markets in Asia Pacific. Japan’s Nikkei 225 (9,438.8 +1.37%), Aussie All Ordinaries (3,795.3 +0.36%), Hong Kong Hang Seng (17,885.3 +5.26%), and Shanghai Composite (2,632.9 +1.71%), and India’s BSE 30 (14,109.6 +3.83%) all lifted.

Later Wednesday in the European equity bourses, the French CAC (3,282.5 7:57AM ET +0.38%), German DAX (4,990.7 7:42AM ET +0.10%) and UK FTSE 100 (4,408.8 7:42AM ET -0.07%) were awaiting the release of more US economic data, which is to say awaiting marching orders from Washington-New York.

The US long Bond ($USB 118.66 -0.66 -0.55%) closed down again, which is four days in five of losses. The yields were as follows for 30-year (4.446 +0.54 +1.23%), 10-year (3.493 +0.45 +1.31%), and 5-year (2.261 +0.57 +2.59%). Treasury bill yields closed with a yield of 0.165 -0.10 -5.71%.

Bonds have sunk in price this past week as traders pondered the possible lowering of credit ratings of sovereign debt of the US and UK. The losers are those who are on pensions and fixed income.

Crude Oil ($WTIC 62.45 +0.78 +1.26%) continued to strengthen, despite a stronger $USD. The Oppenheimer oil analyst told the Bloomberg audience he is surprised that oil prices are higher than $40, but his is an apolitical argument that misses the main point, which is that the politics of money is very much present today. Earlier Wednesday, Oil futures were up a tad (62.84 +0.39 +0.62% 07:37am ET).

$GOLD futures, which had been lifting, suffered a pull-back early yesterday as the $USD was sent soaring on the Korea news, but then held support, closing down a bit (952.10 -5.30 -0.55%)

Spot (cash) market prices earlier this morning were as follows: Gold (950.65 +1.70 +0.18% 08:01am ET), Palladium (227 -1 -0.44% 08:01am ET), Platinum (1134 +4 +0.35% 08:01am ET), and Silver (14.50 +0.01 +0.07% 08:01am ET).

Stock futures for the DJIA (8475 +14 +0.17% 07:52am ET) were quiet.

Comments

[Clive Corcoran:]

The consumer confidence numbers yesterday are yet another example of the Through the Looking Glass World that the US economy is entering. The principal driver of renewed confidence is the fact that equities have surged since early March.

Instead of increased confidence leading to greater appetite for equities it is exactly the converse.

Alice would have been delighted.

May 27 10:32 AM

[Mad Hedge F...:]

Be careful what you wish for. Today is the 60th anniversary of the launch of the Intelligent Investor, by Benjamin Graham, the Bible for all fundamental analysts. So it behooves us to recognize that multiples for the S&P 500 have just leapt from 13.1 to 15.5 times in a mere two months, the sharpest and most rapid multiple expansion in history. Did I say multiple expansion? Have the fundamentals really gotten that good, that fast? I think not. If anything, we are enjoying the calm between two back to back hurricanes. You only have three days left to sell in May and go away.

May 27 11:58 AM

[Mistrofan:]

Mad Hedge - I am so sorry to agree with you.

May 27 07:57 PM

[Francis Sch...:]

The 'only' reason why stock markets soar, is because of the communicating financial vessels. Nothing more nothing less. All the rest is static. It exists because each day people want to explain why markets go up or down. By doing so, the emit moe static.
If you are a fund manager sitting on huge liquidities you know you have at a certain point no alternate but to invest these. As the Bond markets are sliding down, there are little alternates left.

May 28 11:25 AM

[TATyszka:]

from: www.marketwatch.com/st...
"And an unemotional analysis of the historical record suggests that big jumps in consumer confidence are typically followed by below-average stock market performance."

May 28 09:30 PM