The stock market is poised to end the week on a positive note but momentum is starting to fade a little. Investors were cautious after some comments from Federal Reserve Chairman Ben Bernanke made last night. A bounce in the dollar has sparked some profit taking in commodities, which have been market leaders most of the week.
Asian markets were in positive territory. The Chinese Shanghai index had been closed for the last eight days finally reopened. It seems the Shanghai is trying to catch up with the rest of the world and produced a sharp 4.7% gain on Friday. Investors are looking for positive economic data from the Chinese government next week. The Hong Kong Hang Seng index marked its fifth gain in a row but just barely. The Hang Seng inched higher for a 0.03% gain. The Japanese NIKKEI index delivered a 1.8% gain as the dollar rallied against the yen, which helps Japanese exporters. Today's gain pushed the NIKKEI back above the psychological 10,000 level.
European markets were generally flat to down but all of them pared their losses from the midday lows. England said their trade gap narrowed to 6.24 billion pounds while Germany reported that their trade surplus declined in August. This was the first decline in four months for Germany. The German DAX index lost 0.08%. The English FTSE gained 0.14%. The French CAC-40 lost 0.19%.
Ben Bernanke was making headlines today as the markets reacted to his comments from the Board of Governors conference last night. It's not a surprise that Bernanke said the Federal Reserve will eventually have to raise rates to ward off inflation. Yet it seems that traders weren't quite ready to hear him say so. Of course no one expects the Fed to raise rates any time soon. The larger fear right now would be the Fed raising rates too early and putting the recovery in jeopardy.
Bernanke's comments gave the dollar some strength and the currency is bouncing sharply. This is putting pressure on commodities. Gold futures are down almost $10 to $1,046 an ounce after hitting new all-time highs yesterday. Crude oil is down about 0.5% near $71.30 a barrel. Copper is down about 1.4%. Commodity-related stocks were some of the best performers this week and today they're seeing some profit taking ahead of the weekend. One analyst on CNBC was suggesting that traders use this dip in commodity-related stocks as a buying opportunity since the bounce in the dollar is probably temporary.
In other news the U.S. reported that its exports rose for the fourth month in a row. The Commerce Department said that our trade deficit fell 3.5% to $30.7 billion in August. Economists were expecting a rise to $33 billion but a sharp drop in demand for oil and a weak dollar help narrow the trade gap. Currently the trade deficit is running at an annual pace of $357 billion, which is a big improvement over last year's pace at $695.9 billion.
At the moment the S&P 500 index is up 0.29% at 1,068. The NASDAQ composite is up about 0.5% at 2,134. The Dow Industrials are up about 0.48% at 9,834. The small cap Russell 2000 index is up 0.55% at 611. For the most part stocks are bouncing off their intraday lows and look poised to run higher into the afternoon.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
The market has been moving sideways most of Friday's session but we are seeing some movement on the OptionInvestor.com play list. ACL is up 1.3% and hitting new two-week highs above $142. CLB is pulling back and offering a new entry point near $104. DHR is on the move with a 1.9% gain. ESRX is showing some strength with a 1.9% gain. SOHU is showing relative weakness and broke down intraday under various levels of support hitting our stop loss in the process.