Strong Start Fizzles In PM


Market Commentary:

The major averages opened sharply higher as the US dollar plunged after the latest round of stronger-than-expected housing data was released. Volume, a critical component of institutional demand, was lower than Friday’s levels on the NYSE and on the Nasdaq exchange which was expected since a series of options expired on Friday. Advancers trumped decliners by over a 3-to-1 ratio on the NYSE and by over a 2-to-1 ratio on the Nasdaq exchange. There were 41 high-ranked companies from the Leaders List making a new 52-week high and appearing on the BreakOuts Page, higher from the 12 issues that appeared on the prior session. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange.

Healthy Housing Data Lifts Stocks

Investors sent stocks higher after the National Association of Realtors released a report which showed that sales of existing homes topped estimates. Sales rose +10% in October to the highest level since February 2007 which helped offset concern that the housing recovery was in jeopardy. Last week, stocks got hit after a series of weaker-than-expected housing market reports were released. So Monday’s news was a welcomed sign that record low interest rates and a national home buyer credit would aid this ailing sector.

Gold surged to a fresh all time high overnight as the dollar snapped a three day winning streak. Crude oil jumped above $79 a barrel and copper jumped to a 14-month high before pulling back. Commodity markets rallied and the dollar fell after Iran’s military ran some exercises in the Middle East.

Fed Watch:

Charles Evans, president of the Federal Reserve Bank of Chicago, told the Financial Times that US interest rates may stay near record lows (just above zero) until “late 2010, perhaps later.” This helped allay concern that the Fed may begin raising rates in early 2010. In other central bank news, the Bank of Israel unexpectedly raised their benchmark interest rate for a second time since the recovery began at the end of Q1 2009. The bank said economic growth had accelerated and inflation approached the top of its target range. The Tel Aviv 25 Index rose +1% on the news.

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