Stocks Make Modest Gains As Gentle Ben Soothes Nerves

Wednesday’s big event was Federal Reserve Chairman Ben Bernanke’s testimony before the House Financial Services Committee. Nobody seemed to care about the release of the Fed’s Beige Book on a day when Dr. Bernanke was making a live appearance. The Chairman’s testimony helped stocks ease out of Tuesday’s slump, after he repeated that the dreaded taper of the quantitative easing program would be triggered by stronger economic data than what we are currently seeing. Most of the questions from Committee members were focused on concerns of their preferred lobbyists, rather than the issue of cutbacks to the Fed’s bond-buying program.

Wednesday’s bad news came from the Commerce Department’s Census Bureau in the form of the June Housing Starts report. Although economists were hoping to see an increase in the seasonally-adjusted annual rate (SAAR) to 951,000 from May’s 914,000 SAAR, the report indicated a decline to 836,000. Nevertheless, the disappointing number was the result of a decline in volatile, multiple-family residential construction. Construction starts for single-family residences were down only 0.8 percent (or 5,000) from May’s revised SAAR of 596,000. Building permit authorizations for single-family homes were up 0.6 percent in June, explaining the robust homebuilder confidence index for July, which was released on Tuesday.

The Dow Jones Industrial Average (DIA) picked up 18 points to finish Wednesday’s trading session at 15,470 for a 0.18 percent advance. The S&P 500 (SPY) rose 0.28 percent to close at 1,680.

The Nasdaq 100 (QQQ) advanced 0.25 percent to finish at 3,085. The Russell 2000 (IWM) climbed 0.36 percent to end the day at 1,042.

In other major markets, oil (USO) surged 0.85 percent to close at $37.80.

On London’s ICE Futures Europe Exchange, September futures for Brent crude oil advanced by 52 cents (0.48 percent) to $108.66/bbl. (BNO).

August Gold Futures declined by $16.20 (1.26 percent) to $1,274.20 per ounce (GLD).

Transports fired-up their Sabre engines on Wednesday, with the Dow Jones Transportation Average (IYT) accelerating 0.90 percent.

In Japan, stocks advanced as the yen weakened to 99.51 per dollar during Wednesday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY).. The Nikkei 225 Stock Average advanced 0.11 percent to 14,615 (EWJ).

In China, bartenders and bankers brought bad news to the stock market as reduced demand for alcoholic beverages and a 3-percent nosedive by China’s largest brokerage, Citic Securities, took their toll on the Shanghai Index. The Shanghai Composite Index sank 1.01 percent to close at 2,044 (FXI). Hong Kong’s Hang Seng Index advanced 0.28 percent to finish the session at 21,371 (EWH).

European stocks made solid gains on Wednesday, as mining companies helped the commodities sector lead the advance (VGK). Companies such as BHP Billiton, Rio Tinto and Glencore Xstrata made big gains after Tuesday’s downbeat trading session.

The Euro STOXX 50 Index finished Wednesday’s session with a 0.61 percent advance to 2,681 – struggling back toward its 50-day moving average of 2,701. Its Relative Strength Index is 53.57 (FEZ).

Technical indicators reveal that the S&P 500 remained above its 50-day moving average of 1,637 after finishing Wednesday’s session with a 0.28 percent advance to 1,680. At this point, bears are anticipating the formation of a double-top. Its Relative Strength Index rose from 64.23 to 65.43. Both the MACD and the signal line continue to rise above the zero line, suggesting an advance.

For Wednesday, all sectors were in positive territory, except for the utilities sector, which took a 0.04 percent dip. The materials sector led the group, with a gain of 0.93 percent.

Consumer Discretionary (XLY): +0.05%

Technology: (XLK): +0.08%

Industrials (XLI): +0.29%

Materials: (XLB): +0.93%

Energy (XLE): +0.44%

Financials: (XLF): +0.42%

Utilities (XLU): -0.04%

Health Care: (XLV): +0.26%

Consumer Staples (XLP): +0.19%

Bottom line: Despite widespread anxiety concerning what Ben Bernanke would say about the dreaded tapering of quantitative easing during his testimony before Congress on Wednesday, stocks made a modest advance after he reminded us that the taper would be triggered by data rather than a date.

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