EmailTrading volume increased yesterday and the stock market maintained an upward bias. The Dow Jones Industrial Average logged its 10th straight winning session and the S&P 500 jumped 0.6%, leaving it less than two points away from a new, closing record high.
Yesterday's trade was exactly how it should have been. Granted the volume could have been heavier (that won't be a problem today with the quarterly options expiration), but the bullish bias was more than defensible given the encouraging initial claims data.
Every sector ended higher and the cyclical sectors led the way.
After the close, the Federal Reserve released the second installment of the CCAR report, which offered insight on which of the 18 biggest banks got the Fed's blessing on their capital distribution plans. BB&T (BBT) and Ally Financial were the only banks whose plans were rejected. Goldman Sachs (GS) and JPMorgan Chase (JPM) have to submit new capital plans by the end of the third quarter, but were still allowed to proceed with their capital plans.
The CCAR results provided good news overall for the banks and their investors, yet the overall response thus far has been fairly muted.
It is instructive to know that banks and the financials have been rallying ahead of this report. The Financial Select Sector SPDR (XLF) has rallied 5.0% since the end of February, so it is fair to say the good news was expected.
With the S&P 500 on the doorstep of establishing an all-time closing high, bullish spirits aren't overflowing this morning. The S&P futures are unchanged and are trading in-line with fair value. That suggests the cash market is apt to start the session on a relatively flat note.
That's not to say the market won't shift into a higher gear as the day progresses, as has been its custom this month. However, conviction on both the buy side and the sell side appears to be lacking at the moment.
There is a large slate of economic data today, which began with the February Consumer Price Index and March Empire State Manufacturing reports at 8:30 a.m. ET. Neither of those reports moved the dial much.
In a certain sense, the CPI report was a mirror image of yesterday's PPI report. Led by higher energy costs, total CPI increased 0.7% month-over-month (Briefing.com consensus +0.5%). The gasoline index rose 9.1% and accounted for almost three-fourths of the increase. Core CPI, which excludes food and energy, jumped 0.2%, as expected.
Over the last 12 months, total CPI and core CPI increased 2.0% before seasonal adjustment. That is within the Fed's tolerance zone for inflation, so the CPI report isn't going to cause any undue inflation alarm.
The Treasury market's response reflected that perspective. The 10-yr note improved a few ticks after the release of the CPI data and is now unchanged for the day with its yield at 2.04%.
Separately, the March Empire Manufacturing report was also taken in stride. It showed a reading of 9.2. That was above the Briefing.com consensus estimate of 6.5, yet down slightly from the prior month's level of 10.0. A number above zero indicates expansion.
The Industrial Production report for February (Briefing.com consensus +0.4%; prior -0.1%) and the University of Michigan Consumer Sentiment report for March (Briefing.com consensus 77.6; prior 77.6) will be released at 9:15 a.m. and 9:55 a.m., respectively.
Those reports, and especially the sentiment report, could go a long way toward determining if the S&P 500 joins the Dow in record-high territory.
