Stocks have shown a notable move to the upside over the course of afternoon trading on Tuesday, with the major averages extending the upward move seen earlier in the session. Traders are picking up stocks at reduced levels following the losses seen in the two previous sessions.
In an interview with RTT News, Robert Loest, senior portfolio manager at Integrity Mutual Funds, said the strength in the markets reflects a continuation of a bear market rally that he said, may have more legs.
This rally could last for another couple of weeks, Loest said, but he added, I'd be surprised if it lasted beyond that. Loest predicted that an awful first quarter earnings season would put an end to the rally. I don't think we should look for any good news on the earnings front, he warned.
Additionally, Loest said that he doesn't expect to see an end to the bear market for several years, highlighting the fact that there is dramatically less capital and credit available in the world than there was two years ago. This is going to take a generation to rebuild, he stressed.
On the economic front, the S&P/Case-Shiller 20-City Composite Home Price Index for January fell 19.0 percent compared to the same month a year ago, reflecting an acceleration from a revised 18.6 percent year-over-year decline in December.
Separately, the Institute for Supply Management - Chicago said its index of activity in the Chicago-area manufacturing sector fell to 31.4 in March from 34.2 in February, with a reading below 50 indicating a contraction in the sector. Economists had been expecting the index to edge up to a reading of 34.3.
Meanwhile, the Conference Board's consumer confidence index edged up to 26.0 in March from a record low reading of 25.3 in February, although economists had been expecting a somewhat more significant increase by the index to a reading of 28.0.
In other news, the Senate Finance Committee examined the progress of the Troubled Asset Relief Program in a hearing on Tuesday, with the results of the first six months of the $700 billion financial bailout determined to have been unsteady and raising concerns about whether or not the funds are being used in the best possible manner.
The program puts taxpayers at risk for $2.9 trillion, the Special Inspector General for the TARP Neil Barofsky said at the hearing.
Committee Chairman Senator Max Baucus, D-Mont., noted that $2.9 trillion is like having a second United States Government budget, dedicated solely to saving the financial system.
Because the majority of the $700 billion has already been committed, Baucus called for a focus on oversight to ensure that the funds are spent wisely, especially in the wake of the American International Group (AIG) bonus crisis.
In recent trading, the major averages have pulled back off their highs for the session, although they are holding onto substantial gains. The Dow is currently up 157.22 at 7,679.24, the Nasdaq is up 43.07 at 1,544.87 and the S&P 500 is up 17.84 at 805.37.
Nearly all of the Dow components are moving higher on the day, contributing to the strong upward move by the blue chip index. However, General Motors (GM) is bucking the uptrend, posting another considerable loss for the session.
Currently, shares of GM are down 15.6 percent, pulling back further off the two and a half month closing high it set on Friday. Johnson & Johnson (JNJ) is posting the only other loss, edging down just 0.1 percent.
At the other end of the spectrum, Alcoa (AA), Bank of America (BAC), and Citigroup (C) are turning in some of the best performances of the day, with Alcoa up 12.3 percent, while Bank of America and Citigroup are posting gains of 11.8 percent and 9.1 percent, respectively.
The gain by Alcoa comes after Deutsche Bank upgraded its rating on the aluminum producer to Hold from Sell. Analysts upgraded the stock after seeing that financing fears have been pushed into 2010 following the recent equity placement.
JP Morgan (JPM) and American Express (AXP) are joining the other financial related stocks, posting gains of 8.1 percent and 6.2 percent, respectively.
Additionally, tech giants Microsoft (MSFT), IBM (IBM), and Intel (INTC) are also showing noteworthy advances on the session.
While real estate and banking stocks continue to lead the broader markets higher, brokerage stocks are also showing significant gains, helping to lift the Amex Securities Broker/Dealer Index 5.9 percent on the day.
Within the sector, Knight Capital Group (NITE) is one of the best performers, posting a gain of 10.1 percent so far. With the advance, the stock has risen well off of the four-month closing low it set in the previous session.
Health insurance, steel, and software stocks are also posting notable gains on the day, with the Morgan Stanley Healthcare Payor Index up 5.1 percent, while the Amex Steel Index and the Amex Software Index are posting gains of 4.6 percent and 3.8 percent, respectively.
With the considerable strength in the broader markets, most of the other major sectors are also moving higher.
In overseas trading, the major stocks markets in the Asia-Pacific region turned in a mixed performance on Tuesday. While Hong Kong's Hang Seng Index rose 0.9 percent, Japan's benchmark Nikkei 255 Index fell 1.5 percent.
Meanwhile, the major European markets ultimately closed near their intraday highs, well above the unchanged line. The U.K.'s FTSE 100 Index posted a gain of 4.3 percent, while the French CAC 40 Index and the German DAX Index closed up 3.2 percent and 2.4 percent, respectively.
In the bond market, treasuries are well off their highs of the day but continue to show some strength. Subsequently, the yield on the benchmark 10-year note is down less than a basis point at 2.706 percent.
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