SPX Hits Highest Level Since Lehman Bankruptcy
Stocks closed at fresh new highs as the S&P 500 Index reached its highest close since Lehman Brothers went bankrupt in September 2008. In terms of trading, not much has changed. There is an underlying bid to stocks, but not much chasing or "panic" buying. Volumes, attendance and liquidity are all thinning out as we move closer towards the holidays. That being said, low volumes and quiet news flow could also bring some volatility in the near term.
Broader market themes remain the same: 1) Investors are more optimistic on the global economy, especially with most earnings reports coming in strong; 2) European sovereign debt concerns are being viewed as less a systemic risk despite some unresolved issues there and 3) There is a higher comfort level around China and that country's monetary policy/inflation outlook heading into 2011 and as geopolitical tensions in Korea eased.
The Dow Jones Industrial Average ended up 55.03 points, or 0.48%, to close at 11,533. The S&P 500 rose 7.52 points, or 0.60%, to close at 1254, and the NASDAQ was up 18.05 points, or 0.68%, to finish at 2667. Most key S&P 500 sectors gained, led by financials, materials and energy, while consumer staples and healthcare were down.
The CBOE Volatility IndexI:VIX closed up 0.49%, at $16.49, with January time spreaders active in 30 and 35 calls. 59,000 put contracts traded as compared to 156,000 call contracts.
SPDR S&P 500 ETF (SPY) - Get Report volatility remained low on more puts than calls as the ETF touched a 52-week high. SPY is up 6% for the month, to close up by $0.79, at $124.39. January put option implied volatility is at 15, February at 17 and March at 19, below its 26-week average of 22, suggesting decreasing near-term price movement. Volume was light on 692,000 puts compared to 446,000 calls. The SPY rallied through the 61.8% Fibonacci retracement of the 2007-2009 bear market slide in early December. Technical analysts say the SPY is headed to the 76.4% retracement at $136.20.
PowerShares QQQ Trust (QQQQ) low volatility reflected descending component volatility of ascending stock prices of AMZN, MSFT, CSCO, AAPL. The Qs touched a new 52-week high to close up $0.33, at $54.89. January put option implied volatility is at 17, February is at 19 and March is at 20, versus its six-month average of 22, suggesting low near-term price movement compared to outer months. Volume was light on 111,000 put contracts compared to 78,000 call contracts.
The following economic data are expected to be released on Wednesday: MBA Purchase Applications due out at 7:00 a.m. EST, GDP and Corporate Profits at 8:30 a.m. EST, Existing Home Sales at 10:00 a.m. EST and the EIA Petroleum Status Report at 10:30 a.m. EST; Thursday: Durable Goods, Personal Income and Outlays and Jobless Claims due out at 8:30 a.m. EST, Consumer Sentiment at 9:55 a.m. EST, New Home Sales at 10:00 a.m. EST and the EIA Natural Gas Report at 10:30 a.m. EST. There will be no economic data on Friday as the markets are closed in observance of Christmas.
The following notable companies are expected to report Wednesday before the open: AM, LNN, NAV and WAG; earnings after the close: BBBY, CBK and MU.
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