With an hour left in trading the news that JPMorgan Chase ($JPM) has passed the stress test and plans to hike its dividend and buy back shares sent the market soaring. Since that time we have found out all but 4 of the banks passed the stress tests. This sent the SPDR Financial ETF ($XLF) up 3.8% today to the best level since July 2011.
The news sent $JPM higher by 7% for the session. I am smiling as I type this as $JPM is one of the firms bigger positions. It is nice to see patience pay off and the gains begin to pile up. I expect this strength to carry over into tomorrow and could be enough to help the market continue its current bull market. The S&P 500 is now up 11% for the year.
With that being said, I do have a bit of caution for investors that are only now deciding it is time to get back into stocks. I do not want to say you are too late, but the reward-to-risk situation is not as attractive as it was three months ago. We have been doing some buying and selling since the year began to position for this rally. My prediction for the S&P 500 was in the 1500 to 1550 range for the mid-year high. Today the index closed at 1395, that leaves another 9% on the upside at the mid-range of the prediction.
The support for the index is about 5% below the current price and therefore the reward-to-risk is 9-to-5, not the ideal setup for getting back into the market. A pullback to the low to mid 1300's would be much more attractive for new money. We will continue to pick individual stocks/ETFs that offer better setups and could participate in a rally to 1550.
I will share one such ETF with you. The iShares Realty Majors Index ETF ($ICF) invests in a basket of REITs and broke out of a consolidation pattern today. There is strong support at the $74-$75 area and it closed today at $76.06. The dividend yield is 2.8%.
Market expert and TV personality Matt McCall blogs about what is really moving the markets. He will emphasize Exchange-Traded Funds (ETFs) and individual stocks throughout the trading day.
Showing posts with label stress tests. Show all posts
Showing posts with label stress tests. Show all posts
Tuesday, March 13, 2012
Mid-Day Update: Financials Rally, Retail Sales, Greenback
The S&P 500 is gaining nearly 1% as we approach the lunchtime hour on the east coast. The market is being led by the financial stocks as the risk-on trade is back.
Financials Rally
The SPDR Financial ETF ($XLF) is up 1.3% today to the best level since last August and is being led by big gains from Goldman Sachs (NYSE: GS), Morgan Stanley ($MS), and JPMorgan Chase ($JPM). The rally comes ahead of the release of the bank stress tests on Thursday. The speculation is that the results will allow the banks to increase their dividend payouts and buy back shares. Both scenarios will lead to more investors flocking to the sector and is why the buying has begun today.
Retail Sales
US Retail Sales biggest gain in five months with February up 1.1% versus 0.6% in January. Sales ex-autos came in at 0.9% versus expectations of 0.7%. It appears the consumer continues to chug along even as the overall view on the economy remains neutral at best. The SPDR Retail ETF ($XRT) is breaking out to a new all-time high on the news.
Greenback Rallies
The U.S. Dollar Index hit the best level in nearly two months as investors view the currency as the best of the best. The Euro continues to hit headwinds due to the sovereign debt issues, the Yen is falling with the BOJ decision, and the U.S. appears to have the best economy of the developed nations. The PowerShares US Dollar Index Bullish ETF ($UUP) was last up 0.2%.
Financials Rally
The SPDR Financial ETF ($XLF) is up 1.3% today to the best level since last August and is being led by big gains from Goldman Sachs (NYSE: GS), Morgan Stanley ($MS), and JPMorgan Chase ($JPM). The rally comes ahead of the release of the bank stress tests on Thursday. The speculation is that the results will allow the banks to increase their dividend payouts and buy back shares. Both scenarios will lead to more investors flocking to the sector and is why the buying has begun today.
Retail Sales
US Retail Sales biggest gain in five months with February up 1.1% versus 0.6% in January. Sales ex-autos came in at 0.9% versus expectations of 0.7%. It appears the consumer continues to chug along even as the overall view on the economy remains neutral at best. The SPDR Retail ETF ($XRT) is breaking out to a new all-time high on the news.
Greenback Rallies
The U.S. Dollar Index hit the best level in nearly two months as investors view the currency as the best of the best. The Euro continues to hit headwinds due to the sovereign debt issues, the Yen is falling with the BOJ decision, and the U.S. appears to have the best economy of the developed nations. The PowerShares US Dollar Index Bullish ETF ($UUP) was last up 0.2%.
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