Yellen, Trade Figures Spread Relief

Tuesday was a “risk on” day for investors after the nation’s trade deficit declined more than expected.

Good news from the Commerce Department’s Census Bureau had investors feeling bullish at Tuesday’s opening bell. The nation’s trade deficit declined to $34.3 billion in November compared to October’s $39.3 billion, which was downwardly revised from the initial report of $40.6 billion. Economists were expecting a decline to $39.9 billion from October’s initial reading. The fact that October’s revised reading was actually lower than economists’ estimates for November helped bolster enthusiasm.

Investors were relieved that Janet Yellen was confirmed as the next Federal Reserve Chair, without the usual legislative chaos. There is nothing the stock market hates more than uncertainty. The Dow Jones Industrial Average (NYSEARCA:DIA) picked up 105 points to finish Tuesday’s trading session at 16,530 for a 0.64 percent advance. The S&P 500 (NYSEARCA:SPY) climbed 0.61 percent to finish at 1,837. The Nasdaq 100 (NASDAQ:QQQ) surged 0.88 percent to finish at 3,557. The Russell 2000 (NYSEARCA:IWM) soared 0.91 percent to end the day at 1,157.

On London’s ICE Futures Europe Exchange, February futures for Brent crude oil advanced 64 cents (0.60 percent) to $107.06/bbl. (NYSEARCA:BNO). February gold futures declined $7.10 (0.57 percent) to $1,230.90 per ounce (NYSEARCA:GLD). Transports were successfully ice-road trucking on Tuesday, as the Dow Jones Transportation Average (NYSEARCA:IYT) climbed 0.67 percent.

In Japan, the exchange rate for the yen was again the dominant factor in stock market activity. Stocks flopped and chopped around on Tuesday as the yen spent most of the trading session between 104.22 per dollar and 104.43 per dollar. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (NYSEARCA:FXY). The Nikkei 225 Stock Average declined 0.59 percent to 15,814 (NYSEARCA:EWJ).

Stocks made slight advances in China as enthusiasm about the pricing of the first initial public offerings available since October of 2012 was offset by the latest moves to curb the nation’s shadow banking industry. The Shanghai Composite Index rose 0.08 percent to 2,047 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index advanced 0.13 percent to 22,712 (NYSEARCA:EWH).

In Europe, there was plenty of good news to send stocks soaring higher. Destatis reported that unemployment in Germany declined by 1.4 percent between October and November.

Ireland held a successful bond auction, selling €3.75 million in ten-year bonds after exiting its €85 billion EU – IMF bailout on December 15. The ten-year bond yield fell to an 8-year low of 3.25 percent. The Euro STOXX 50 Index jumped 1.36 percent to 3,110 on Tuesday – climbing further above its 50-day moving average of 3,038. Its Relative Strength Index is 60.99 (NYSEARCA:FEZ).

Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,795 after advancing 0.61 percent to finish Tuesday’s trading session at 1,837. Its Relative Strength Index rose from 57.81 to 62.23. The MACD is dropping toward the signal line, which would suggest that the S&P could resume its decline during the immediate future.

John Nyaradi is the author of The ETF Investing Premium Newsletter.

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