Stocks finished higher on Tuesday, though well off of their intraday highs. Major indices started the session gaining following a sharp rally in China overnight. Continued easing speculation and increasing expectations for pension fund investments led the Shanghai index to post its largest rally since October 2009, which underpinned stocks here in the U.S.
Positive news from Europe included a successful Spanish bond auction, solid demand for €1.5B worth of EFSF six-month bills, and a better-than-expected German business confidence. However, Europe was still regarded as a tailwind on Tuesday due to Friday’s S&P downgrade of nine Eurozone countries, and Monday’s downgrade of the EFSF.
Another highlight early on was a better-than-expected U.S. Empire Manufacturing Index, though the data did little to help stocks.
Despite the gap up in the major indices and approximately 15 minutes of early morning rallying, Tuesday’s session was controlled by the bears. The market is now heavily overbought in the short-term, and traders used today’s rally to sell stocks intraday ahead of some potentially troubling news later this week. Stocks finished well off of their intraday highs, though still firmly above Friday’s closing prices.
On Wednesday the Greeks will try to finalize the deal with private bondholders to try and convince them to take a larger write-down. Also, earnings season kicks into high gear as we move through the week. Both events have the potential to shake-up this (as-of-late) relatively calm market, should either disappoint.
Close Recap: S&P 500 +0.36%, NASDAQ +0.64%, DJIA +0.48%, Midcaps +0.28%.
Have a pleasant evening.
S&P 500 - Intraday
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