Momentum buyers drive stocks higher

optionMONSTER

Stocks are rising this morning as momentum investors return to the market.

S&P 500 futures are climbing by about three-tenths of a percent but have weakened slightly in the last hour after Caterpillar missed expectations and cut its full-year guidance. Europe is also gaining after Asian bourses closed mostly higher overnight, led by another strong showing by Japan's Nikkei.

The firm start is a continuation of the sentiment on Friday, when the S&P 500 closed near its highs after finding support at its 50-day moving average. It had broken out to new all-time highs and then retreated preceding that bounce. The big question now facing investors is whether that drop was the pullback signaled a buying opportunity or was the start of a bigger decline.

Corporate results and economic data will likely influence their decisions. This earnings season is off to a lukewarm start, as companies including Alcoa, IBM, and Verizon reported weak revenue. There will also be important economic reports this evening and early tomorrow morning as China and Europe report manufacturing data.

Currencies and commodities are mixed despite the bullish move in equities. The euro and Australian dollar are both modestly lower, while the Japanese yen is little-changed. Copper, viewed as a bellwether for economic sentiment, fell another two-thirds of a percent and is making a new 52-week low. Oil, however, is up more than half a percent while precious metals are surging almost some 2.5 percent as they rebound from steep declines in the last month.

Our proprietary researchLAB service shows that price action has been mostly conservative in the last month as utilities and health-care stocks led the market higher while economically sensitive sectors such as energy and materials have lagged. Transports and small caps, which had led the market higher earlier in the year, have also been the worst performers in the last month.

Amid individual companies, CAT is actually up about 1 percent despite its weak numbers. Oil-service giant Halliburton is higher by more than 4 percent after its earnings and revenue beat expectations.

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