Stocks Continue To Ride On Hope

Stocks continued their advance on Friday as investors remained hopeful that a deal could be arranged in Washington.

Stocks headed higher on Friday, as negotiations continued toward the goals of resolving the budget impasse and debt ceiling issues. With no report on retail sales from the Commerce Department (due to the shutdown), there was no bad news to discourage investors, other than the preliminary Thompson Reuters/University of Michigan Consumer Sentiment Index for October. The Consumer Sentiment Index fell to 75.2 from September’s 77.5.

The Dow Jones Industrial Average (DIA) picked up 111 points to finish Friday’s trading session at 15,237 for a 0.73 percent advance. The S&P 500 (NYSEARCA:SPY) advanced 0.63 percent to close at 1,703.

The Nasdaq 100 (QQQ) surged 0.72 percent to finish at 3,233. The Russell 2000 (NYSEARCA:IWM) skyrocketed 1.39 percent to end the day at 1,084.

In other major markets, oil (USO) sank 0.94 percent to close at $36.75.

On London’s ICE Futures Europe Exchange, December futures for Brent crude oil declined 60 cents (0.54 percent) to $110.33/bbl. (BNO).

December gold futures sank $26.30 (2.03 percent) to $1,270.60 per ounce (GLD).

Transports continued to gain altitude on Friday, with the Dow Jones Transportation Average (IYT) climbing 0.53 percent.

Once again, yen weakness was the primary driving force behind Japanese stocks on Friday, as increasing possibilities for a truce in Washington strengthened the dollar against the yen. The exchange rate for the yen fell to 98.55 per dollar during Friday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). Panasonic’s share price soared 2.80 percent on the Tokyo Stock Exchange. The Nikkei 225 Stock Average jumped 1.48 percent to 14,404 (EWJ).

In China, stocks rallied after a report from the China Association of Automobile Manufacturers indicated that sales of passenger vehicles increased by 21 percent during September. The rally got an extra boost as a result of government chatter concerning “SOE reform” – changes in the management of state-owned enterprises, which were recently criticized by the World Bank as presenting headwinds to the nation’s economic growth. The Shanghai Composite Index jumped 1.70 percent to close at 2,228 (FXI). Hong Kong’s Hang Seng Index surged 1.16 percent to end the session at 23,218 (EWH).

As usual, events in the United States were reported as being the controlling influences in the European stock market, even though there was not much movement in the STOXX 50 index. All of the action was in England, as the FTSE 100 Index surged 0.88 percent, following a report on increasing home prices. Meanwhile, European Central Bank President, Mario Draghi warned that “financial backstops” need to be in place before the ECB discloses the results of the stress tests, to be performed on the region’s banks. Short-sellers must have been encouraged by Draghi’s remark.

The Euro STOXX 50 Index finished Friday’s session with a 0.16 percent advance to 2,974 – climbing further above its 50-day moving average of 2,851. Its Relative Strength Index is 65.89 (FEZ).

Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,678 after finishing Friday’s session with a 0.63 percent surge to 1,703. Its Relative Strength Index rose from 53.58 to 56.74. The MACD has now crossed above the zero line and is poised to cross above the signal line, suggesting the likelihood of a continued advance.

For Friday, all sectors remained solidly in positive territory. The energy sector led the group, with a 1.08 percent jump.

Consumer Discretionary (XLY): +0.86%

Technology: (XLK): +0.84%

Industrials (XLI): +0.47%

Materials: (XLB): +0.59%

Energy (XLE): +1.08%

Financials: (XLF): +0.57%

Utilities (XLU): +0.46%

Health Care: (XLV): +0.47%

Consumer Staples (XLP): +0.30%

Bottom line: Stocks continued their advance on Friday as investors remained hopeful that a truce could be reached in Washington.

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