Stocks continue to rally on strong earnings results, analyst upgrades, and improving economic indicators. The S&P 500 is up five out of the last six sessions and the index is now testing major resistance near the 950 level. The tech-heavy NASDAQ is up nine days in a row and currently trading above potential round-number resistance at the 1900 level. Goldman Sachs raised their forecast for the market and CIT appears to have inked a deal with bondholders to stave off bankruptcy.
The rally continued in Asia as well. The Hong Kong Hang Seng index soared a whopping 3.7% and marked its fifth gain in a row. The Chinese Shanghai gained another 2.4%, yet another new 52-week high. The Japanese markets were closed for holiday. European markets continued to rally with most of the major indices setting their sixth gain in a row. Financial stocks helped lead the way higher with the German DAX index gaining 1.0%. The English FTSE rising 1.25%. The French CAC-40 gained 1.6%.
Goldman Sachs was making headlines again this time with an upgraded market forecast. Goldman's chief U.S. investment strategist raised his 2009-year end forecast for the S&P 500 from 940 to 1060. He also raised his 2009 earnings estimates on the S&P 500 by 30% to $52 a share. The 2010 earnings estimates were adjusted up 19% to $75 a share. According to Bloomberg, Goldman Sachs expects the market to produce the "steepest second-half rally since 1982" this year.
The embattled CIT Group Inc. (CIT) is one of the market's big stories with the stock up 80% to $1.26 a share on news of a financing deal. Analysts were a little perplexed last week when the story surfaced that CIT was heading toward bankruptcy due to liquidity problems and the government refused to help. CIT is a huge lender to small and mid-sized businesses. The National Retail Federation said that if CIT went under it would affect thousands of wholesalers who supply product to over 300,000 stores. CIT claims that a bankruptcy would impact almost a million businesses that depend on them for financing. A failure of this size would completely undermine the economy's recovery and force a number of businesses to go under, which would increase unemployment, foreclosures, etc. CIT has already received about $2.3 billion in TARP funds but the government was not interested in extending any more help and a bankruptcy filing seemed imminent late last week. Today the stock is up sharply on news that the company has arranged for $3 billion in financing from 7 of its top 10 bondholders. This is a short-term solution but it gives time for CIT to refinance its debt. The company has a $1 billion debt payment due in August and needs to refinance more than $7 billion in the first quarter of 2010.
In economic news the New York-based Conference Board's index is leading economic indicators (LEI) came in better than expected. Economists were looking for an improvement of 0.4%. June's numbers showed a rise of 0.7% while May's results were revised up from 1.2% to 1.3%. The LEI index is designed to forecast economic activity over the next three to six months. June's gain was the third gain in a row and we haven't seen three in a row since the middle of 2005.
Meanwhile commodities were in rally mode as the U.S. dollar continues to sink. Mining stocks were performing well as gold and copper marched higher. Crude oil is up about 40 cents near $64.00 a barrel. The commodity has been a little bit volatile today with an intraday high of $64.90 as traders position themselves ahead of the August oil futures expiration tomorrow after the closing bell.
Currently the S&P 500 index is up 0.6% at 946 and testing major resistance at the 950 level. After a six-day rally odds are good that the index will correct first before moving higher. The NASDAQ is up 0.8% and rising above the 1900 level. This is an important test of resistance dating back to mid October 2008. The Dow Industrials are up 0.7% and trading above the 8800 level. The small cap Russell 2000 is up 0.4% at 524.
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:
Scanning the OptionInvestor.com play list for movers I see that AZO is bouncing from a test of support near $154 but the stock continues to under perform the market. The rally in BG might be forming a short-term top. The FXE euro ETF is hitting new relative highs over $142.00. The GDX gold-miner ETF has hit our first target near $40.00. PII is up 3.6% and breaking out over resistance at $35.00. Retail stocks continue to rise. Traders may want to exit any bearish positions in SHLD as it flirts with a potential bullish breakout near $65.00.