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Equities pull back after record close

David Russell (david.russell@optionmonster.com)

Stocks are edging lower this morning after another record close on Friday.

S&P 500 futures are down two-tenths of a percent. European indexes have been falling modestly since the open and remain little-changed overall. Asian markets rallied overnight, led by gains of more than 1 percent in Hong Kong and Tokyo.

The S&P 500 is up 7 percent since bouncing at its 50-day moving average one month ago. Other benchmarks including the German DAX, the Dow Jones Transportation Average, and the Russell 2000 small-cap index have also broken to new highs. The strength has been varied across many areas, with limited correlation between currencies, commodities, and equities. That indicates that real money is being put to work rather than a limited number of big hedge funds driving up the market with leveraged positions, which was the case before the 2008 crash.

Some of the latest beneficiaries of the buying have been stocks that were among the worst losers in the last 2-3 years: Greek and Spanish banks, education companies, solar stocks, and ocean shippers. Our researchLAB market screener also shows a trend in the last week toward automotive companies, tire makers, and truckers.

There are few major data releases to guide traders in the next two sessions. Attention will likely focus on Federal Reserve Chairman Ben Bernanke's testimony before Congress on Wednesday as pundits debate when the central bank will scale back on its easy-money policies. Home Depot reports quarterly results tomorrow morning, and Chinese and European manufacturing numbers come later in the week.

Foreign-exchange trading paints a mixed picture this morning, while commodities are mildly bearish. Currencies associated with risk appetite, such as the euro and Australian dollar, are up slightly against the U.S. dollar. But the Japanese yen, which tends to move in the opposite direction, is higher across the board.

Oil is down by more than half a percent, copper is falling almost one-third of a percent, and agricultural foodstuffs are modestly lower. The bloodletting continues in precious metals as silver declines almost 3 percent and gold loses almost 1 percent.

In company-specific news, Internet giant Yahoo may be active on a report it will buy the popular blogging site Tumblr for $1.1 billion. Chesapeake Energy also announced that it would hire Robert Douglas Lawler, an executive at Anadarko Petroleum, as its new CEO. He replaces the controversial Aubrey McClendon, who was forced out last month.

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