U.S. markets showed strength for a 2nd-straight session following its worst two-week performance in more than two years.
The indexes traded higher throughout the session following some early morning volatility but closed near session highs while pushing short-term resistance levels.
The Dow rallied 1.7% after testing a high of 24,765 and temporarily regaining positive territory for the year. The S&P 500 soared 1.4% after tapping an intraday high of 2,672 and coming within a point of returning to positive territory for 2018.
The Nasdaq jumped 1.6% after trading to an intraday high of 7,023 while closing just below the 7,000 level. The index is back in positive for the year after closing above 6,903.
The Russell 2000 was slightly weak on the open after testing a low of 1,466 before regaining its footing to push 1,500.
The index gained 0.9% but needs to clear 1,535 to get back into positive territory for the year.
Materials led sector strength after rising 2% followed by Technology and Energy which added 1.7% and 1.6%, respectively. Real Estate was up 0.3% and was the sector laggard.
Global Economy – European markets rebounded from Friday’s drubbing to settle higher across the board and were led by Germany’s DAX 30 1.5% advance. UK’s FTSE 100, France’s CAC 40 and the Stoxx Europe 600 gained 1.2% while the Belgium20 climbed 1.1%.
Asian markets settled mixed with South Korea’s Kospi higher by 1.1% and China’s Shanghai up 0.8%.
Australia’s S&P/ASX 200 slipped 0.3% and Hong Kong’s Hang Seng dipped 0.2%. Japan’s Nikkei was closed for a holiday.
China January new yuan loans increased by a record 2.9 trillion yuan, topping expectations of 2.05 trillion yuan.
January aggregate financing rose 3.06 trillion yuan, weaker than expectations of 3.15 trillion yuan, but still the largest increase in a year.
U.S. Treasury Budget posted a $49.2 billion budget surplus for January, less than the $61 billion expected and below the $51.3 billion surplus a year ago.
Receipts were up 4.9% year-over-year versus the 9.7% previously. Outlays rose to a 6.5% year-over-year pace vesus 13.3%.
The fiscal deficit now stands at -$175.7 billion versus -$158.6 billion.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) snapped a four-session slide after trading to a high of $119.30. Resistance at $119-$119.50 was split but held into the closing bell.
Support remains at $117.50-$117 with a close below the latter signaling additional weakness to $116.50-$116 and fresh 52-week lows.
Market Analysis – The Spider Small-Cap 600 ETF (SLY) closed higher for the second-straight session after trading to a high of $130.24. Continued closes above resistance at $130.25-$130.50 would be a slightly bullish development.
Support is at $128-$127.50 with the close below the latter signaling another backtest towards $126-$125.50 and the 200-day moving average.
RSI is back in an uptrend with short-term resistance at 40. Continued closes above this level would be bullish for a run towards 50.
The Industrials Select Sector Spider (XLI) tested a high of $75.54 with resistance at $75.50-$76 holding. Continued closes above the latter could lead to a push towards $76.50-$77 and the 50-day moving average.
Near-term support is at $74-$73.75 with a close below the latter being a slightly bearish development.
RSI cleared short-term resistance at 40 with continued closes above this level leading to a test towards 50. Support is at 30.
All the best,
Roger Scott