The U.S. markets are bouncing off their lows of the session. Traders bought the decline this morning near the Friday lows and it's forming a very short-term technical bottom suggesting this bounce has further to go. Of course everything could change if the Fed or President Obama says something negative on Wednesday. Overall stocks are in a positive mood thanks to rising consumer confidence numbers.
The sell-off in Asia resumed with a vengeance today. The Chinese government announced new requirements for banks to raise their reserve ratios effectively curbing lending for the economy. Financial stocks were hit hard in Chinese markets. The Hong Kong Hang Seng lost 2.38% for its fifth loss in a row and breaking down under round-number support at the 20,000 level. The Chinese Shanghai index gave up 2.4% for its third decline in a row with a drop toward possible support near the 3,000 level. The Japanese NIKKEI lost 1.78% posting its third decline in a row.
It was a different story in Europe. The tone was bearish this morning but stocks slowly drifted higher and eventually rallied on better than expected U.S. consumer confidence numbers. European markets ended a four-day losing streak. The English FTSE rose 0.3%. Both the German DAX and French CAC-40 rose 0.67%.
The Conference Board's consumer confidence numbers are one of the big stories today. This is a private firm that surveys 5,000 households. Economists were expecting consumer confidence to tick lower from 53.6 in December to 53.5. The January reading came in at 55.9, which is good news since a confident consumer spends more money than a nervous consumer. We still have a ways to go since it takes a reading of 90 to indicate a healthy consumer confidence number and over 100 for growth. Most of the gains for January's rise came from the "present-day" conditions component. The RLX retail index is up 1.0% on the session.
Home prices affect consumer confidence and how "wealthy" consumers feel. Yesterday we got the NAR existing home sales data, which was terrible but it did show a small increase in home prices for December. This morning the Case-Shiller/S&P home price index was announced for November, which might be considered old news. The Case-Shiller index for the top 20 metro areas showed prices fell 0.2% in November versus a 0.1% drop in October. If you're a glass-is-half-full kind of person then you'll be happy to note that the pace of decline has slowed for ten months in a row in what has been a three-year plunge for home prices.
The FOMC began their first meeting of the year today. The market could be quiet tomorrow as investors wait for the Federal Reserve to announce their decision on interest rates Wednesday afternoon. No one expects the Fed to raise rates to the focus will be on their comments regarding the health of and risks to the economy. Speaking of the economy the International Monetary Fund (IMF) raised their outlook for the global economy. The IMF has raised their global forecast for +3.9% growth up from +3.1% growth. It will be interesting to hear what President Obama has to say about the economy during his first State of the Union speech on Wednesday night.
Currently the market is trading near its best levels of the day. A small gain for the U.S. dollar isn't having much affect on commodities. Oil is down slightly near $75 a barrel. Gold futures are up about $5 to $1,101 an ounce. Some of the best performers today are insurance (+1.5%), retail (+1.1%), oil services (+1.4%), and semiconductors (+0.99%). The worst performers are healthcare stocks (-1.4%).
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
I am not seeing a lot of movement on the OptionInvestor.com play list. However, the consumer confidence number is having an effect on the RTH retail holders. If the RTH closes at current levels it will look like a short-term bullish reversal.