It was beginning to appear as though the S&P 500 index would finish the year in negative territory. Thursday’s trading action pushed the S&P above the crucial 1,257 level, raising hopes that the bullishness might hold through Friday. Nevertheless, it is important to keep in mind that if the S&P 500 does indeed finish the year in the black – it will be the result of activity on just the final two trading days of the year. Thursday’s bullishness resulted from the herd’s decision to ignore the disappointing report on initial unemployment claims and to focus, instead, on the pending home sales report from the National Association of Realtors. First, let’s take a look at the Department of Labor’s report on initial unemployment claims:
In the week ending December 24, the advance figure for seasonally adjusted initial claims was 381,000, an increase of 15,000 from the previous week’s revised figure of 366,000. The 4-week moving average was 375,000, a decrease of 5,750 from the previous week’s revised average of 380,750.
There was plenty of room for spin here – and it was exploited. Some commentators rejoiced in the fact that the statistic has stayed below the 400,000 level – which had seemed impenetrable until a few months ago. Other commentators focused on the 4-week moving average, which decreased by 5,750 from the previous week’s revised average of 380,750.
Thursday’s irrational exuberance resulted from the upbeat pending home sales report from the National Association of Realtors. Jeffry Bartash of MarketWatch provided this report:
Pending home sales rose 7.3% in November to the highest level in 19 months, according to an industry trade group. The National Association of Realtors said its pending sales index rose to 100.1 in November from a revised 93.3 in October, and it’s now 5.9% above its year-ago level. “Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high,” said Lawrence Yun, NAR’s chief economist.
Nevertheless, reports issued by the National Association of Realtors (particularly last week’s existing home sales report) have been harshly criticized by a number of sources. The NAR’s chief economist, Lawrence Yun, has earned the nickname “Baghdad Bob” at the Zero Hedge website. Michael Shedlock (a/k/a Mish) joined in on the criticism of last week’s existing home sales report.
The Dow Jones Industrial Average jumped by 135 points on Thursday, to close at 12,287 for a gain of 1.12 percent. The S&P 500 advanced by 1.07 percent to finish at 1,263. The NASDAQ Composite (still negative on the year) picked up another 92 basis points (0.92 percent) to end the day at 2,613.
Miami-based corporations had a solid day on Thursday. Lennar (LEN) led the group, as a result of the bullish pending home sales report, with a whopping gain of 4.64% to close at 19.86. Royal Caribbean (RCL) was next, rising by 1.66% to finish at 25.18. Ryder System (R) advanced by 1.46% to close at 53.47. Carnival Cruise Lines (CCL) rose by 1.17% to end the day at 32.87.
Cano Petroleum (CFW) will be the only heavily-traded corporation playing “beat the number” on Friday with the release of its quarterly earnings report. Good luck!