EmailThe stock market caught a second wind yesterday afternoon and rallied into the closing bell, finishing at its highs for the day. For good measure, the 10-year note finished at its lows for the day. The equity advance was good for a 0.6% gain for the S&P 500 that erased the entirety of what was lost and then some following the nonfarm payrolls report on Friday.
The advance was paced by the financial, consumer discretionary, consumer staples, transport, and utilities sectors. In other words, there was nothing definitive about market sentiment in that leadership pack, which was filled with cyclical and countercyclical groups alike.
It was a thin move, though, given that a mere 583 mln shares were traded at the NYSE, making it one of the lightest trading days of the year, suggesting the winds could shift just as easily the other way for the stock market.
At the moment, the S&P 500 is poised to start today's session on a slightly higher note.
Some might suggest Alcoa's (AA) better-than-expected earnings report is a reason behind the market's resilience, yet that explanation falls short considering AA is trading 1.2% lower in pre-market action. That move is understandable when taking into account that Alcoa's revenues were down 2.9% and light of expectations and that inventories grew at a noticeably faster rate (+5.6%) than sales (-1.1%) quarter-over-quarter.
In turn, we read some reports attributing the overnight strength in Asian and European markets to gains in basic materials stocks that moved on Alcoa's report. What they most likely moved on was China's CPI report, which showed inflation slowing to a 2.1% year-over-year rate in March versus 3.2% in February.
The CPI report from China should temper concerns about monetary tightening to slow growth in an effort to tamp down inflation. All else equal, the more growth there can be in China, the more demand there will ultimately be for basic materials.
Europe caught some added benefit from better-than-expected industrial production data out of the UK and a higher-than-expected trade surplus for Germany in February, although it would be remiss not to add that both German exports and imports declined in February.
The big corporate headline this morning is that Ron Johnson is out as CEO of JC Penney (JCP) and that former CEO Mike Ullman is back as CEO. Shares of JCP surged in after-hours action on the first report, but then rolled over quickly on word of Ullman's return.
JCP is currently down 8.0% in premarket trading as these questionable moves make JC Penney look like a company without any good answers. Conspicuously absent in this executive turnover is any word of change in the company's board of directors (other than Ullman being elected), which has some culpability in the operational mess JC Penney finds itself in.
JC Penney will be a story stock throughout the day, but the bigger storyline will be whether the market can string together back-to-back gains and break a streak of 14 consecutive sessions where it has alternated between gains and losses.
