Bulls finally show some life, sending the Dow for a triple digit advance. The Dow ($INDU) gained 157.18 points Tuesday to close at 12,207.59. The S&P 500 ($SPX) added 21.29 points to 1,395.41. The NASDAQ ($COMPQ) tacked on 44.46 points, or 1.90 percent, to close at 2,385.14. Volume was strong with the NYSE trading 1.83 billion shares and the Naz turning over 2.16 billion shares. Market breadth was sharply positive by a 28-to-6 and 25-to-6 margin on the Big Board and Naz respectively, which was exactly the opposite of yesterday.
A rally in the overseas markets helped get U.S. stocks off to a good start Tuesday. A gain in the dollar against the yen was also a positive that convinced traders to buy the recent decline. Comments from Treasury Secretary Henry Paulson that the economy is in great shape also provided strength. Now we have to see if the employment report Friday provides enough strength to keep the bulls active.
The sub-prime lending market has been a major story this past week, creating huge declines for companies that have a large interest in these types of loans. New Century Financial (NEW) shares fell 70 percent yesterday, but were able to recover 10 percent today. The company announced yesterday that it is technically in default to several lenders and that it is under investigation by federal regulators. The bounce in lending stocks was accompanied by gains in housing stocks as well. The Philly Housing Sector Index ($HGX) gained 1.7 percent today.
Former Federal Reserve Chairman Alan Greenspan stated today that he sees a 33 percent chance of a recession in 2007. This isn't the type of thing the bulls want to hear, although most Fed leaders have provided optimistic outlooks the economy both in the U.S. and globally. However, economic data released today didn't support this view.
Fourth quarter productivity was revised lower to 1.6 percent growth from the initial reading of 3.0 percent. At the same time, unit labor costs soared to 6.6 percent from the initial figure of 1.1 percent. This was also more than double estimates, though economists are holding off until Friday's employment report to come to any conclusions. Factory orders in January fell sharply, down 5.6 percent and off 2.9 percent with transportation orders excluded. This supports the view that the manufacturing sector is decelerating, which has been confirmed with weak readings in the ISM Index the past four months.
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