Following the worst Thanksgiving week since 1932, the S&P 500 surged nearly 3% today and the other major U.S. indexes took part in the good cheer as record Black Friday sales and some less bad news out of Europe helped the S&P 500 snap a seven-day skid. The Nasdaq added 3.2% and the Russell 2000 notched its best day in weeks with a gain of nearly 4.8%.
While shoppers headed to stores in droves over Black Friday, which actually is counted as four days not one, one place folks still are not spending much money is in the real estate market. The Commerce Department said new home sales rose 1.3% in October to to a seasonally adjusted annual rate of 307,000, but the September reading was revised down to 303,000. No matter how you slice the September and October readings, they are both well below the 700,000 sales economists view as necessary for the housing market to be considered healthy.
The median sales price fell to $213,200. That is the lowest level since October 2010. The National Association of Realtors said there is 6.3 months worth of excess supply on the market today.
As I mentioned at the start, Black Friday 2011 was a banner one for U.S. retailers as consumers spent an estimated $52.4 billion during the four-day weekend, up from $45 billion last year, according to the National Retail Federation. Even with that big number, SPDR S&P Retail ETF(XRT) did not offer much intraday follow through after a small gap up at the open.
While it really was not a Merger Monday, it is Cyber Monday today. I was reading the Los Angeles Times over the weekend and there was an interesting anecdote about Cyber Monday in there. Back in 2006, Cyber Monday was merely 12th-largest online spending day of the year. Last year, it was tops with $1 billion in sales. Some analysts forecast a jump to $1.2 billion this year.
That is good news for a stock like Amazon (AMZN) and could easily explain why that stock soared 6.4% today on above average volume. Morgan Stanley was out with a note today, rating Amazon ''overweight'' with a $260 price target. That is some excellent upside from $194.15 where Amazon closed today.
The shopping procrastinators among us ''will likely have to turn to a retailer that can provide guaranteed delivery as late as possible. With December 24 falling on a Saturday, only those retailers with the best logistics systems will be able to fulfill orders that Friday, December 23,'' Morgan Stanley said in a note.
In case you did not hear or you are not a big sports fan, the NBA owners and players reached a tentative labor agreement over the weekend that will end the league's 149-day work stoppage. The NBA's regular season normally starts with games on or around Halloween, but the labor strife will lead to training camp starting next week with the first games scheduled for Christmas Day. A normal NBA regular season is 82 games, but 66 will be played this year if the deal is ratified as soon as expected.
I mention this because the news did have an impact on select stocks. Sure, shares of Nike (NKE) and Under Armour (UA) were on the move because of Black Friday results and Foot Locker for the same reason and an analyst upgrade. However, it would be foolish to under estimate the impact the return of the NBA on these stocks. Dow component Walt Disney (DIS) was up 1.7% and I will go out on a limb and say most of that gain was attributable to the NBA news.
If you need further convincing the NBA news moved some stocks higher, check out the chart of Madison Square Garden (MSG), the company that owns the famous arena and the New York Knicks.
Moving away from discretionary and retail names, it was no surprise to see high-beta energy and materials names contributing to Monday's rally in a big way. Shares of Molycorp (MCP), the largest U.S-based rare earths miner, screamed higher by nearly 14% after the company signed a deal with Japan's Daido Steel Co and Mitsubishi to produce and sell high-powered rare earth magnets. Colorado-based Molycorp will have a 30% stake in the venture.
First production will take place in Japan and Molycorp did say in a statement that some production could be seen here in the U.S. at a later date. At the very least, the news provided beleaguered Molycorp investors with a reason to smile today.
As you could see in the stats table, it was a fine day for oil futures, which boosted oil equities as well. One of the big movers in that group was Anadarko Petroleum (APC). The second-largest U.S. independent oil and natural gas producer said one of its wells off the coast of the African nation of Mozambique might hold more gas than previously expected. A lot more. Try 15 trillion to 30 trillion cubic feet.
One analyst opined that this might mean that Anadarko might look for a partner to help harvest this bounty of natural gas. Still, the headlines sent the stock up by almost 5.5%. I get the feeling I have written about Anadarko a lot lately. I also get the feeling that it is almost always good news. Maybe there is something to that.
The big news after hours once again came courtesy of one of Big Three ratings agencies. Fitch said today that it will maintain a AAA rating on Uncle Sam's long-term debt obligations, but Fitch also pared its outlook on the U.S. to negative from stable. Fitch said the switch to a negative outlook meant the credit agency believed there was slightly greater than a 50 percent chance it would downgrade long-term U.S. debt in the next two years, according to the Associated Press.
Fitch said what most of us already: The failure of Congress to make substantive spending cuts until after next year's elections means cuts will just be that much harder to when Congress actually gets around to them.
Looking at the charts, the S&P 500's big jump today brings the index within earshot of resistance in the 1195-1200. From there, it could be a slow grind higher in increments of 10-15 points. Or we could get another day like today and that would have the S&P 500 sniffing 1250 sooner rather than later. In the even of another pullback, it would be encouraging to see 1185 hold as support this time.
S&P 500 Chart
The Dow Jones Industrial Average has a chart that is only moderately more attractive than the S&P 500's and to the Dow's credit, it never challenged support at 10,600 during the November slide. Of course the good news is the Dow ran through resistance at 11,400 with ease today and with the close above 11,500, we can start talking about resistance at 11,600. My reservation regarding the Dow, particularly in the case of a stock like CVX, is that we are seeing an oversold rally and nothing else.
The Nasdaq is another case of an index that easily sliced through resistance today. The tech-heavy index ran through resistance at 2475 and round-number resistance at 2500 and could make at a run at 2535 on Tuesday. Even with the big gains today for AMZN and AAPL, those two Nasdaq darlings are still well off their highs and well below the lofty price targets some analysts have on the stocks. Maybe tech is starting to offer some value in what is supposed to be the best time of the year to be involved with tech stocks.
I am usually skeptical of, well, just about anything and I feel the same way about Monday's rally. Still, it is a happy time of year and Monday's action certainly is conducive to a Santa Claus rally. Then again, hopes for that rally depend largely on Europe and Friday's jobs report. I did some buying today, starting a small position in a tech ETF, but I did not make a large bet and I am not sure when I will.
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