Courtesy of John Nyaradi.
Dow Jones Industrial Average approaches 14,000 on earnings and economic hopes.
The Dow Jones Industrial Average (NYSEARCA:DIA) approaches the 14,000 level, a psychologically and technically important level, closing Tuesday’s trading session just 45 points away from the magic number.
The Dow Jones Industrial Average (NYSEARCA:DIA) finished Tuesday at levels not seen for five years and touched 13,969 during the trading day. The Dow Jones Industrial Average’s all time closing high is 14,164, set in October, 2007, approximately 1.5% above today’s closing price.
The S&P 500 (NYSEARCA:SPY) also climbed today, up 0.51% to 1507 which is also near its all time closing high of 1565, set in October, 2007.
The rally in the Dow Jones Industrial Average (NYSEARCA:DIA) has been fueled by positive earnings reports, with more than 60% of S&P 500 (NYSEARCA:SPY) companies beating earnings estimates so far in the current earnings season.
The Nasdaq 100 (NYSEARCA:QQQ) fared less well, gaining just 0.04% and the Russell 2000 (NYSEARCA:IWM) was also tepid with a 0.07% gain. Muted action in the Nasdaq 100 (NYSEARCA:QQQ) and Russell 2000 (NYSEARCA:IWM) could be viewed as a negative since these two indexes typically are considered to be market leaders.
In other major markets, gold (NYSEARCA:GLD) rose 0.48% to $1660.80/oz and oil (NYSEARCA:USO) jumped 1.17% to $97.57/bbl. which represents its highest close since September, 2012.
In economic news, the Federal Reserve is meeting today and tomorrow and will make its interest rate announcement at the conclusion of its meeting on Wednesday. No policy changes are expected and people are beginning to pay more attention to Janet Yellen, Vice Chairman of the Fed, who could be Dr. Bernanke’s replacement if he isn’t appointed for a new term at the end of this year. Dr. Yellen is considered to be a dovish Fed member with many analysts saying she would pursue an even more aggressive policy of monetary easing than has been conducted by the Bernanke Fed.
Case/Shiller Home Price Index rose in November by 5.5% while Consumer Confidence unexpectedly took a huge plunge in January to 58.6, down from December’s 66.7 and widely missing expectations.
Nevertheless, investors are cheering the recent rally in the Dow Jones Industrial Average (NYSEARCA:DIA) and other major U.S. ETFs, putting record amounts of money into stock funds and ETFs in January. This could mark a sea change in investor behavior as small investors have generally shunned the stock market since the onset of the “Great Recession.” In response, stocks have generally been rising since the first of the year while bond prices have been falling with a commensurate rise in interest rates. Read “Case/Shiller and Consumer Confidence”
Contrarians would say that this behavior marks a top in stock prices as retail investors are generally late to the party and the crowd is oftentimes wrong. Read “Will The Average Investor Take The Plunge”
Wednesday will bring economic reports including GDP estimates and ADP Employment, along with the FOMC announcement.
Important earnings reports will come from Facebook and Boeing.
Bottom line: The Dow Jones Industrial Average (NYSEARCA:DIA) and other major U.S. stock indexes continue their recent advance and now face serious resistance at all time highs that lie just above today’s levels. A break above these levels would clear the way for more gains while failure here would set the stage for a possibly significant decline.
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