Investors Go On A Buying Spree, Send Stock Prices Higher

DC deadlock

Stocks made a decent rebound on Friday. The widespread belief that the government shutdown will end soon and that the gnomes in Washington will resolve the debt ceiling deadlock sent investors on a buying spree before the weekend.

Meanwhile, San Francisco FedHead John Williams warned that for every two weeks the government remains closed, 25 basis points (0.25 percent) will be shaved off the fourth quarter GDP.

The homebuilders sector had a bad day as the ten-year Treasury yield rose to 2.65 percent, sending homebuilder stocks into the basement. The higher yield raised concerns that increased mortgage rates would stifle demand for new homes. Toll Brothers (TOL) took a 3.15 percent nosedive. Beazer Homes (BZH) collapsed 2.7 percent and PulteGroup (PHM) fell 1.82 percent. The SPDR S&P Homebuilders ETF (XHB) declined 0.56 percent.

The Dow Jones Industrial Average (DIA) picked up 76 points to finish Friday’s trading session at 15,072 for a 0.51 percent advance. The S&P 500 (SPY) surged 0.71 percent to close at 1,690.

The Nasdaq 100 (QQQ) jumped 0.89 percent to finish at 3,242. The Russell 2000 (IWM) climbed 0.69 percent to close at 1,078.

In other major markets, oil (USO) advanced 0.47 percent to close at $37.31.

On London’s ICE Futures Europe Exchange, December futures for Brent crude oil advanced 34 cents (0.31 percent) to $108.41/bbl. (BNO).

December gold futures fell $7.60 (0.58 percent) to $1,310.00 per ounce (GLD). Precious Metals Need Equity Market Weakness

Transports were back in the express lane on Friday, with the Dow Jones Transportation Average (IYT) advancing 0.54 percent.

America’s government shutdown continued to suppress Japan’s stock market on Friday, as the weakened dollar has brought unwanted yen strength. The yen strengthened to 97.09 per dollar during Friday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). Sony’s share price in Tokyo sank 1.75 percent by the closing bell. The Nikkei 225 Stock Average dropped 0.94 percent to 14,024 (EWJ).

In China, the Shanghai Stock Exchange has been closed through the week for National Day (FXI). Stocks retreated on the Hong Kong Stock Exchange as gamblers on Macau’s casino stocks took profits following this week’s advance. Uncertainty about the Chinese government’s plans to readjust telecom interconnection fees brought a decline for that sector on Friday. Hong Kong’s Hang Seng Index declined 0.33 percent to end the session at 23,138 (EWH).

In Europe, stocks made a healthy advance as Italy’s success in avoiding a political crisis raised hopes that sanity would return to American politics in time for the country to avoid a sovereign default (VGK). The Italian stock market rallied after a committee from the nation’s Senate voted to expel “The Thing That Wouldn’t Leave” (a/k/a Silvio Berlusconi) from the upper house. The boot-shaped nation’s full Senate will vote on whether it will give Berlusconi the boot in approximately two weeks. Italy’s FTSE MIB index skyrocketed 1.59 percent on Friday (EWI).

The Euro STOXX 50 Index finished Friday’s session with a 0.90 percent surge to 2,928 – climbing further above its 50-day moving average of 2,835. Its Relative Strength Index is 60.53 (FEZ).

Technical indicators revealed that the S&P 500 climbed back above its 50-day moving average of 1,679 after finishing Friday’s session with a 0.71 percent surge to 1,690. Its Relative Strength Index jumped from 46.74 to 51.94. Although the MACD is above the zero line, it remains below the signal line, suggesting the likelihood of a retreat.

For Friday, all sectors finished solidly in positive territory. The materials sector led the group, with a 1.45 percent advance.

Consumer Discretionary (XLY): +0.94%

Technology: (XLK): +0.41

Industrials (XLI): +0.65%

Materials: (XLB): +1.45%

Energy (XLE): +1.01%

Financials: (XLF): +0.81%

Utilities (XLU): +0.19%

Health Care: (XLV): +1.12%

Consumer Staples (XLP): +0.15%

Bottom line: Acting on optimism that the forces of reason will sneak under the Capitol rotunda and overtake its denizens, investors went on a Friday buying spree, sending stock prices higher.

Disclaimer: The content included herein is for educational and informational purposes only, and readers agree to Wall Street Sector Selector's Disclaimer, Terms of Use, and Privacy Policy before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group, LLC.