12 Reasons Markets Rallied into 4th of July
Dow 12,582 S&P500 1,339 Nasdaq 2,816 Gold 1,483 Oil 94
The Dow (NYSE:DIA) and S&P (NYSE:SPY) fell this week. However, the Nasdaq (NASDAQ:QQQ) was able to pull out a victory for bulls. Oil (NYSE:USO) barely budged after big news. Gold (NYSE:GLD) and Silver (NYSE:SLV) headed back to critical support lines.
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Now, for the 15 reasons markets moved this week:
1) France steps up. As Greek politicians meet in Athens to discuss the austerity measures to be voted upon Wednesday, French President Nicolas Sarkozy says that his government is working with private lenders on a new, long-term rescue plan. France’s plan to rollover Greek debt held by French investors would make Greek default much less likely.
2) Tech rallies. Advances in both the S&P and the Dow were led by the technology sector, with tech stocks like Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) leading the way with gains of 3.70% and 4.52% respectively. Even Cisco (NASDAQ:CSCO) managed to make some gains today, up 0.80%.
3) Lower gas prices. There’s almost no better indicator or instigator of market gains than lower gas prices. They seem to temporarily put Americans at ease, give them faith in economic recovery, and just generally put them in a better mood. As crude futures continue to decrease, so have consumer gas prices, with the average cost of a gallon of gas down to $3.57 today from $3.65 last week and $3.80 last month.
1) Greek solution seems imminent. Despite rioting in Athens today, people are feeling confident that Greece’s parliament will pass the austerity measures Wednesday that will prevent the country from defaulting on its debts, hopefully avoiding what could have been a domino effect, with other fragile economies collapsing in Greece’s wake along with Greece’s debtors.
2) Home prices report. According to the Case-Shiller Report, home prices rose in April for the first time in 8 months. While numbers are still down year-over-year, this reversal has people hopeful that the market has turned around.
3) Oil prices jump. While the low gas prices that have resulted from the devaluation of crude futures have increased consumer confidence in the economy, higher oil prices help the market as well, with oil companies like Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) leading Dow gains as crude jumped over 2% today.
1) Greece passes austerity legislation. Yesterday they voted on the austerity measures. Today they implemented them into law. It’s all happening just as everyone had hoped. Now all that’s left is the almost certain approval of a fifth tranche of aid from the EU. Markets are likely to stay high as long as investor confidence is bolstered by consistently positive reports coming out of Greece, but once they’ve received their aid, it will still be a long road to recovery, and markets will have to rely on actual economic progress rather than the avoidance of catastrophe if they are going to continue to grow.
2) Chicago Purchasing Managers Index. Not only did the Chicago PMI increase in June, but it increased more than expected, up to 61.1 last month, over 7 points above the expected 54 rating. Prices paid were lower than they have been since November of last year, thanks in large part to the drop off in oil prices last week that lowered the month’s average.
3) Initial jobless claims. This isn’t a reason markets are up. Actually, it’s a reason they should be down, and a great example of how blinded people have become to the current economic climate in the U.S., which hasn’t been improving as much as it should, or as much as one would think considering the Nasdaq and S&P have almost completely erased losses this quarter and the Dow actually made gains. Initial jobless claims last week were 428,000, down 1,000 from the week before but still up 8,000 from two weeks before. And the employment section of the Chicago PMI was down to its lowest level since December of last year. Whenever the U.S. economy makes small gains, they are largely negated by losses in other sectors.
1) Greece to receive new bailout package. Markets have been up all week, first in anticipation that Greece would approve austerity measures, then because they had been approved and the country would likely receive the final 12 billion euros in their aid package, and now because they might be receiving another 85 billion euros in a second aid package, funded by European nations, private investors, and the IMF. And the good news keeps coming…
2) ISM manufacturing index. The index showed that the manufacturing industry grew significantly in June after economists had expected it to decline. This marked the 23rd month in a row that the index showed growth, up 1.8 points from May to 55.3 in June.
3) Consumer discretionary spending on the rise. The consumer discretionary sector is only 10 points below its bull market high from May 12, up 8.3% since June 16. Today consumer discretionary stocks led the markets, though it may not be a sign of consumer strength but “credit-fueled shopping binges“.
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