Retail Rally Saves Stocks

Stocks benefited from a retail rally on Tuesday after better-than-expected earnings reports from Home Depot (HD), Best Buy (BBY) and TJX (TJX) fed the bulls. After beating earnings expectations on Monday, Urban Outfitters (URBAN) was upgraded by Wedbush Morgan from “neutral” to “outperform”, sending its share price 8.19 percent higher by the closing bell. The SPDR S&P Retail ETF (XRT) skyrocketed 1.53 percent during Tuesday’s session.

The Dow Jones Industrial Average (DIA) lost 7 points to finish Tuesday’s trading session at 15,002 for a 0.05 percent decline. The S&P 500 (SPY) advanced 0.38 percent to close at 1,652.

The Nasdaq 100 (QQQ) climbed 0.40 percent to finish at 3,082. The Russell 2000 (IWM) jumped 1.51 percent to end the day at 1,028.

In other major markets, oil (USO) sank 1.70 percent to close at $37.52.

On London’s ICE Futures Europe Exchange, October futures for Brent crude oil advanced by 22 cents (0.20 percent) to $110.12/bbl. (BNO).

December gold futures advanced by $4.70 (0.34 percent) to $1,370.40 per ounce (GLD).

Transports caught up with Lawrence Stroll’s NART Spyder during Tuesday’s session, with the Dow Jones Transportation Average (IYT) surging 1.02 percent.

Japanese stocks sank on Tuesday as the exchange rate for the yen rose, hurting exporters. The yen strengthened to 97.33 per dollar during Tuesday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). Toyota’s (TM) share price dropped 2.5 percent. The Nikkei 225 Stock Average took a 2.63 percent nosedive to 13,396 (EWJ).

In China, stocks retreated from Monday’s advance as the materials sector led the decline while prices for base metals such as copper and zinc fell more than 0.5 percent in London. The Shanghai Composite Index fell 0.62 percent to close at 2,072 (FXI). Hong Kong’s Hang Seng Index took a 2.20 percent nosedive to end the day at 21,970 (EWH).

European stocks got clobbered on Tuesday after earnings reports from across the materials sector were severely disappointing and earnings forecasts looked bleak (VGK). Coal giant, Glencore Xstrata saw its share price sink 1.4 percent. The world’s largest mining company, BHP Billiton took a 1.35 percent drop. The world’s biggest cement manufacturer, Holcim sank 2.14 percent. HeidelbergCement AG took a 2.9 percent nosedive.

On a happier note, Swiss chocolate manufacturer, Lindt surged 2.23 percent after beating earnings expectations.

The Euro STOXX 50 Index finished Tuesday’s session with a 1.25 percent drop to 2,787 – while remaining above its 50-day moving average of 2,707. Its Relative Strength Index is 51.86 (FEZ).

Technical indicators revealed that the S&P 500 remained just below its 50-day moving average of 1,657 after finishing Tuesday’s session with a 0.38 percent advance to 1,652. At this point, bears are watching the formation of a head-and-shoulders pattern on the S&P chart. (There already is a pinhead-and-shoulders pattern running from the period beginning on July 10 through August 16.) Its Relative Strength Index rose from 35.29 to 39.05. The MACD is below the zero line as well as the signal line, suggesting a decline.

For Tuesday, all sectors were in positive territory. The consumer discretionary sector led the group, gaining 1.02 percent. The consumer staples sector was the laggard, with a 0.02 percent advance.

Consumer Discretionary (XLY): +1.02%

Technology: (XLK): +0.16%

Industrials (XLI): +0.18%

Materials: (XLB): +0.57%

Energy (XLE): +0.61%

Financials: (XLF): +0.96%

Utilities (XLU): +0.94%

Health Care: (XLV): +0.28%

Consumer Staples (XLP): +0.02%

Bottom line: A batch of better-than-expected earnings reports from the retail sector boosted the appetite for risk, sending stocks higher on Tuesday.

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