Stocks are rebounding from yesterday’s route. The Dow and SPX are currently up 192 pts & 1.27%, respectively. The SPX is now sitting at a fresh all-time high. Gains are broad-based across market sectors; healthcare and industrials are up over 1.4% in early trading. The Russell 2000 (small-caps) is up about 1.85%. CNBC is calling this a “classic short squeeze.” Commodities are mostly lower, also reversing yesterday’s trend. WTI crude oil retreated back to $103/barrel and gold is down modestly. The 10-year Treasury ticked up to 2.66%. I’m guessing yields will resume their longer term trend higher.
Investors seem to have concluded that the geopolitical crisis in Ukraine/Crimea will be short-lived with minimal impact on us. Overnight, the US pledged $1bil in loans to stabilize the country’s finances, and the Russian defense minister ordered troops involved in combat drills to return to their bases. Vladimir Putin seems to have convinced everyone (for the moment) that troops deployed to Crimea were only intended to protect Russian military installations.
ISM’s New York regional business index fell to 57.0 in February from 64.4 in the prior month. Any reading above 50.0 indicates improving business activity. The index sat at about the same level a year ago. About 55% of respondents noted bad weather as the biggest impediment to their businesses. I noted that the employment component of the index rose to 65.7, and the forward-looking business conditions outlook shot up to 76.3. These are very strong results.
Tobacco stocks are all up over 2% today. Reynolds American, one of the largest tobacco companies in the US, is preparing a bid to buy Lorillard. While cigarette sales volumes are falling by about 3% per year, Lorillard’s Newport brand has somehow fared better. Even more important, Lorillard is a first mover in the e-cigarette market, having acquired the Blu brand back in 2012. A combination of both companies would control about 37% of the US cigarette market. The WSJ reports Lorillard is probably worth more than $20bil, its current market-cap.
MikesMarketUpdate 