According to Federal Reserve Chairman Ben Bernanke the worst recession since the 1930s is technically over. The comment came from the Q&A session after Bernanke spoke at the Brookings Institute. Bernanke went on to say that while the U.S. economy would probably show growth this quarter it won't feel like the recession is over because unemployment will remain high and will probably still hit 10% before it reverses. The stock market chose to focus on the positive comment that the recession is nearly done and ignored any comments that it would probably take years to reach normal employment levels.
Overall stocks are positive with the market producing a widespread rally. Bernanke's comments combined with some positive retail sales and manufacturing numbers helped set the tone. The PPI came out this morning. Meanwhile Citigroup (C) made headlines as the U.S. Treasury ponders how and when to sell its stake in the company. Foreign markets were generally higher. The brewing trade war with China failed to have much impact today. The Chinese Shanghai index gained 0.2% and marked its 10th gain in the last 11 sessions. The Hong Kong Hang Seng lost 0.3%. The Japanese NIKKEI rose 0.15%.
In Europe the ZEW Center for European Economic Research reported that investor confidence hit its highest levels in more than three years yet the report came in under expectations. Analysts were predicting German investors confidence to rise from 56.1 in August to 60 in September. This morning's report showed a rise to 57.7. The German DAX index gained just 0.16%. The English FTSE rose 0.46%. The French CAC-40 rallied 0.58%.
U.S. retail sales came in better than expected. Economists were expecting August retail sales to rise 1.9% from a 0.1% drop in July. This morning the Commerce Department said retail sales soared +2.7%, which is the biggest jump in more than three years. The cash-for-clunkers program really helped fuel the rebound. While this jump in sales is positive the consumer credit data continues to worsen. Capital One Financial (COF), Discover Financial (DFS) and JPMorgan Chase (JPM) all said their credit card default rates rose in August. In a separate report the Federal Reserve bank of New York said their manufacturing survey hit a two-year high with its economic index rising from 12.1 in August to 18.9 in September.
The government also released the Producer Price Index (PPI), which measures wholesale inflation. The headline number soared 1.7% from August to September compared to estimates for a 0.8% gain. The rise was fueled by a huge surge in gasoline prices. The core-PPI, which excludes the more volatile fuel and food costs, only rose 0.2%.
In corporate news Citigroup (C) is down sharply with a 6% loss and trading under $4.25 a share. Word has surfaced that the Treasury Department is discussing how and when they should start selling their stake in the company. The government owns about 34% of Citigroup. That's 7.69 billion shares and with a conversion price of $3.25 a share the Treasury is sitting on a profit of nearly $10 billion. The thought of the government dumping billions of shares on the market has pushed Citigroup lower today.
Overall the market is hitting new highs for the year. The best performers today are some of the banks, the airlines, the homebuilders, and the gambling stocks continue to show relative strength. The worst performers are drug stocks and healthcare companies. The U.S. dollar is slipping again and oil is bouncing. The USO oil ETF is up almost 2.5%.
Currently the S&P 500 index is up 2.2% at 1051. The NASDAQ is up almost eight points at 2099. The Dow Industrials are up almost 45 points at 9671. The small cap Russell 2000 index is extending its gains up almost four points at 603.
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:
Reviewing the OptionInvestor.com play list for movement I see that AAPL is hitting new highs near $175.60. FedEx (FDX) has hit our second and final target at $79.75. NEU is showing relative strength with a 2.8% gain and a new high over resistance at $90.00. PPG has come close to hitting our first target near $60. Readers may want to take some profits in PPG before the close.