In the movie Blast From the Past, when Brendan Fraser asks why a player has to run from first base to second when a ball is put in play he is told, “Because he must.” That might be the best explanation for why stocks rose today, as high flyers like Regeneron Pharmaceuticals (REGN), Netflix (NFLX) and International Business Machines (IBM) helped lead the major indexes to record highs.
European Pressphoto Agency The S&P 500 gained 0.7% to 1,973.32–its 23 record high this year–while the Dow Jones Industrial Average rose 0.8% to 16,9956.07, also a record. The Nasdaq Composite advanced 1.1% to 4,458.65 and the small-company Russell 2000 jumped 1.1% to 1,205.95 after earlier today hitting a record high of 1,213.55.
Why the sudden rise? Bloomberg credits China, which reported solid manufacturing data, while Reuters points to the Markit US PMI, even though it was revised lower. The Wall Street Journal credits “a dearth of sellers,” which might be the most accurate.
Regeneron Pharmaceuticals gained 7.4% to $303.39 after Sanofi (SNY) added to its position in the biotech company. Netflix jumped 7.4% to $473.10 after Goldman Sachs upgraded its shares to Buy from Neutral.
International Business Machines climbed 2.9% to $186.62, making it the Dow Jones Industrial Average’s biggest winner, followed by Visa (V) and its 1.7% rise to $214.25 after Russia postponed a decision that would have forced them to deposit a large chunk of cash in the country.
Graeme Jarvis of Australian bank Westpac can’t wrap his head around all the buying:
Absolutely stunning night. Everything that felt poor, everything that felt weak, everything that felt not right was banished by the simple turning of a page. The new page on the diary said July 1. It is the start of a new quarter. That must mean buy everything because everything was bought and it is really quite hard to pin down an exact reason.
The data received last night missed on all counts. It was not stunningly weak; it just failed to meet market expectations. ISM came in at 55.3 vs. expectations of 55.9, construction spending at 0.1% vs. 0.5% expectations and economic optimism fell. Sure vehicles sales were slightly better but net on net the data failed to excite. In fact given the weaker construction spending data some shops revised their Q2 GDP estimates a tad lower.
That did not matter because equities simply moved higher, credit indices were offered and yields inched higher. To attribute it solely to the turning of a page may seem lazy but I can find no other reason all that negativ-itiv-ity we have seen in the last few sessions should just evaporate so easily.
Merrill Lynch’s Savita Subramanian and team note that Wall Street strategists have become more bullish, but not enough to derail the market:
The Sell Side Indicator — our measure of Wall Street's bullishness on stocks — improved slightly in June to 51.4 from 51.3. The indicator remains in "Buy" territory, as Wall Street's bearishness is still more extreme than it was at the market lows of March 2009. Given the contrarian nature of this indicator, we remain encouraged by Wall Street's ongoing lack of optimism and the fact that strategists are still recommending that investors significantly underweight equities, at 51% vs. a traditional long-term average benchmark weighting of 60-65%. Even though the S&P 500 has risen by over 40% since sentiment bottomed in 2012, history suggests that strong equity returns can last for years after the indicator troughs.
Today, that certainly seems to be the case.
No comments:
Post a Comment