Market Almost Hits June High

[Excerpted from Bill Cara's Daily Report]

On Monday, two factors helped the US equity market almost revert to its June high of 956.23 on the S&P 500, missing by only 5 points:

(i) There was early news that CIT Group (CIT +78.6% to 1.25) had come to an agreement with its bondholders for $3 billion in financing that would enable the company to avoid bankruptcy. That was good news for the Retailers ($RLX +2.0%) in the Consumer Discretionary sector (XLY +2.1%) as a CIT bankruptcy would disrupt this fall’s shipments.

(ii) Shares of Human Genome Sciences (HGSI +276.8% to 12.51) rocketed higher after the company announced a positive phase 3 study for Benlysta in the treatment of lupus.

After a low volume trading session, the S&P 500 (951.13 +10.75 +1.14% with a high of 951.62), the DJIA (8,848.15 +104.21 +1.19%) and the NASDAQ Composite (1,909.29 +22.68 +1.20%) all had gains of at least +1.1%. http://stockcharts.com/charts/gallery.html?$SPX

The Basic Material (XLB +2.1%) and Industrial (XLI +2.0%) sectors also made strong gains. The Healthcare (XLV +0.2%) and Consumer Staples (XLP +0.3%) sectors were laggards.

Among the leading industries, the winners were Biotech ($BTK +16.3%), based on the HGSI rocket, REITs ($DJR +3.9%) and Goldminers ($XAU +3.4%), while one loser was the Banks ($BKX -0.1%). Among the goldminers, exploration company US Gold (UXG +10.95%) soared as capital flowed into the industry group because of the higher $GOLD price (948.90 +11.50 +1.23%).

Among the Cara 100 companies, the leading company stocks were ICICI Bank, Kookmin Bank and Silver Wheaton (IBN +9.2%, KB +7.9%, and SLW +7.1%). The biggest losers were Nokia (NOK -3.7%) on a well-read story of LG’s taking market share, plus Aetna (AET -3.6%), possibly on the negative reaction in Congress to President Obama’s proposal for healthcare reform.

The $USD (78.87 -0.64 -0.81%) was lower on the day, and the Yen (106.11 -0.01 -0.01%) was flat. The winners were the Euro (142.34 +1.38 +0.98%), Pound (165.53 +2.23 +1.37%) and Loonie (90.37 +0.66 +0.74%), which were up on average about +1% against the USD.

The weak USD helped lift the price of $GOLD (948.90 +11.50 +1.23%) and Crude Oil ($WTIC) (65.29 +0.71 +1.10%). That in turn helped the Canadian equity markets yesterday as the Toronto Composite (10,540.71 +171.29 +1.65%) and Toronto Venture bourse (1,118.09 +22.47 +2.05%) were both stronger than US equity markets.

On Monday, the US long bond ($USB 117.19 +0.92 +0.79%) was strong enough to recover the loss on Friday. The Treasury yields for 30-year (4.466 -0.63 -1.39%), 10-year (3.585 -0.66 -1.81%), and 5-year (2.433 -0.80 -3.18%) were soft.
http://stockcharts.com/charts/gallery.html?$USB

The Treasury bill yield remain largely unchanged (0.160 -0.05 -3.03%).

Earlier Tuesday, Austral-Asian markets were mixed with Japan’s Nikkei 225 very strong and the Chinese Shanghai Composite very weak, while the others were quiet: Japan’s Nikkei 225 (9,652.0 +2.73%), China (3,213.2 -1.64%), Hong Kong (19,501.7 0.00%), Australia (4,048.3 +0.10%), and India (15,062.5 -0.85%).

The European equity bourses have been firm Tuesday, along with US equity futures, following the release of positive Caterpillar earnings. The French CAC (3,308.22 7:51AM ET +1.14%), German DAX (5,098.9 7:36AM ET +1.37%) and UK FTSE 100 (4,485.4 7:36AM ET +0.94%) were up earlier and have gotten even stronger in the past two hours.

Spot gold, palladium, platinum and silver were flat on the day so far: (948.74 -0.86 -0.09% 07:53); (251 0 0.00% 07:52); (1176 -12 -1.01% 07:53); and (13.56 -0.11 -0.80% 07:53), respectively. As Bernanke speaks to Congress, the FOMC usually tries to aid his position by selling precious metals.

This morning Caterpillar (CAT) is up sharply in the pre-market trades after reporting unexpectedly high earnings.

Freeport-McMoran (FCX) has also just beaten earnings, so the confidence is rising that the S&P 500 will now beat the June cycle intra-day high, this morning.

Earlier today, Crude Oil futures were up a tad and so was the equity futures, and those are gaining strength as the open in NY is about to happen.