Stocks are in a green mood this St. Patrick's day. Markets are higher around the world following the Fed's announcement yesterday. The PPI index this morning reinforced the idea that inflation is not a current threat. The dollar weakness is fueling gains across the commodity spectrum.
Asian markets saw hefty gains as investors reacted to the Federal Reserve's statement yesterday and the Bank of Japan's decision to leave rates unchanged. The BoJ also boosted one of its lending programs to increase credit. A weaker yen helped fuel stocks in Japan. The Japanese NIKKEI index rallied 1.1%. The Hong Kong Hang Seng soared 1.7% to a new eight-week high, snapping a three-day losing streak. The Chinese Shanghai index surged 1.9% and closed back above the 3,000 level.
The bounce in Europe continued for a second day in a row. Some of the European markets were hitting 17-month highs. Commodity-related stocks and the financials were the best performers. The English FTSE rose +0.4%. The German DAX gained +0.89%. The French CAC-40 added +0.48%.
This morning the U.S. Labor Department said the Producer Price Index (PPI), a gauge of inflation at the wholesale level, fell 0.6% in February. This was the biggest drop in seven months. Economists were only expecting a 0.2% decline. The pull back was fueled by a significant decline in energy prices. Excluding the more volatile food and energy prices the core PPI gained +0.1%, which was in line with expectations.
The U.S. dollar continues to retreat after forming what looks like a rounded top over the last few weeks. The UUP dollar ETF is currently breaking down under its simple 50-dma. This weakness has been bullish for commodities. Goldman Sachs came out this morning and raised their one-year outlook for commodities. GS predicted that crude oil, copper, corn, and platinum would deliver the biggest returns. For the day oil is up about +0.7% to $82.33 a barrel. Gold futures are up just over $2.00 to $1,124.70 an ounce. Copper is up about 1.3%.
Elsewhere investors are keeping an eye on Washington as President Obama continues his push for healthcare reform. The administration gained another vote today from Dennis Kucinish, a democrat from Ohio. Previously Kucinich had voted against the bill because he felt it did not go far enough. Another surprise this morning was the announcement that Catholic nuns had broken ranks with the bishops and have now thrown their support behind Obama's healthcare push (source: Reuters). The HMO healthcare index is currently up +0.5% on the session.
The market continues to grow more overbought. The S&P 500 has broken out past resistance at the 1150 level and is about to hit the 1170 mark. The NASDAQ is testing the 2400 level. The Dow Industrials have broken out to a new 52-week high past its January resistance. The small cap Russell 2000 is also hitting new relative highs.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
A quick look at the OptionInvestor.com play list reveals that GMCR is breaking out past resistance at $95.00 and has hit our aggressive trigger to open small positions. TEVA is moving the opposite direction and has hit our stop loss.