STTG Market Recap Feb 26, 2013

Stocks rebounded Tuesday from the big selloff Monday but volume was unconvincing and aside from the safety sectors (utilities, healthcare, consumer staples) most of the strength came from very broken stocks, indicating a relief of oversold conditions more than anything.  The main driver of the day was the housing sector as new home sales surpassed expectations.

New home sales jumped in January to a seasonally adjusted annual rate of 437,000, the highest since July 2008, according to the Commerce Department.

Ben Bernanke was on Capital Hill defending the Fed’s actions but really said nothing we have not heard before.   In a very choppy day the S&P 500 added 0.61% and the NASDAQ 0.43%.

Looking at the longer term charts for the major indexes we see both the S&P 500 and NASDAQ breaking down out of their ascending channels.  Aside from a quick headfake in December due to news flow around the fiscal cliff these breakdowns have usually lead to quite substantial corrections both in duration and magnitude.

Major commodities that indicate economic strength continue to be no shows today despite the bounce in equities – see oil and copper.  While they bounced today, in light of the recent selloff, the gains were modest and volume light.

The good housing data helped the sector as did a good earnings report from Home Depot (HD) although the latter may have been helped quite a bit by the rebuilding needed after Superstorm Sandy.

The nation’s leading do-it-yourself home improvement retailer said sales rose 14% in the fourth quarter to $18.2 billion. That helped Home Depot report net earnings of $1 billion, or 68 cents per share, for the quarter. On top of that, Home Depot’s board raised its dividend payment 34% to 39 cents per share, and announced plans to buy back $17 billion of its own stock.  Same store sales growth was 7%.

BespokeInvest blog has an interesting post up from last evening showing which sectors have been hit by this selloff the hardest – as we’ve been stating it is in the pro cyclical growth areas which are not the ones you want to see leading a market down.   Everything to the left of “all” would be considered offensive sectors and everything to the right of it would be the defensive sectors.

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