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Dow Jones notches new high on tech comeback

InvestorPlace logo InvestorPlace 6/19/2017 Anthony Mirhaydari
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Video by Reuters

U.S. equities pushed to new records, with large-caps gapping higher at the open to extend above its two-month uptrend channel. Geopolitical events, from a van attack in London to U.S.-Russia tensions in Syria, were largely ignored. Instead, investors piled into big-tech stocks in the wake of Friday’s Amazon.com, Inc. (NASDAQ:AMZN) and Whole Foods Market, Inc. (NASDAQ:WFM) deal, pushing the Nasdaq Composite to its best one-day gain since November. Last week’s “FAANG” selloff is now a distant memory.

In the end, the Dow Jones Industrial Average gained 0.7%, the S&P 500 Index gained 0.8%, the Nasdaq wafted 1.4% higher and the Russell 2000 added 0.8%. Treasury bonds were weaker, the dollar was stronger, gold lost 0.8% and oil fell 1.2% reversing earlier strength. The weakness in crude bolstered the ProShares UltraShort Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers to a 2.2% gain since added on June 14.

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Breadth was positive, with 1.8 advancers for every declining issue with NYSE volume at 84% of the 30-day average. Technology stocks led the way with a 1.7% gain while energy was the laggard, down 0.7% as a group. Apple Inc. (NASDAQ:AAPL) gained 2.9%, on no specific catalyst.

Steels stocks were on the move, with AK Steel Holding Corporation (NYSE:AKS) up 4.8%, thanks to reports President Donald Trump may soon enact emergency trade sanctions on imported metal on national security grounds.

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On the economic front, New York Federal Reserve President William Dudley said the current economic expansion has “quite a long way to go” bolstering confidence in the economic outlook despite the worst pace of data misses since 2011. Dudley also said halting the Fed’s tightening cycle prematurely could imperil the economy and potentially cause a recession — which for anyone who’s studied Economics 101 is an unconventional sentiment to be sure.

Conclusion

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Searching for a catalyst for today’s rally, the most likely culprit was an overnight liquidity injection by the People’s Bank of China. The move was the largest since January, pushing the Shanghai Composite Index back over its 50-day moving average.

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Notably, the day’s rally also marked a turnaround in market breadth measures with the percentage of S&P 500 stocks in uptrends crossing back over the 70% threshold for the first time since mid-May. Perhaps a reversal of Beijing’s recent crackdown in shadow banking loans, along with confidence boosting comments from Fed officials, could continue to push stocks higher.

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Because investors continue to ignore the rollover in the economic data; or are acknowledging it, and believe it will force the Fed to slow down its rate hike pace.

If so, keep an eye on industrial stocks like Boeing Co (NYSE:BA), which look downright unstoppable here. Energy and retail remain no-go areas.

Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to MSN Money readers.

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