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Market winners deliver a quiet message

The temptation to overthink what’s driving the markets is strong.

News is abundant and instant. The interplay of facts, expectations and emotions is complex and always shifting.

But everyone who follows the tape should make it a point to unplug from the pretzel logic and strip the day-to-day action down to a few core elements.

None of us can know the intentions of the officials in the room tussling over the Greek financial-aid package. So when markets have priced in a decent outcome over a few days it’s logical that headlines of a rejected Greek proposal would trigger a quick pullback in European stocks and riskier bonds.

But the keep-it-simple rule for an American stock player might also have told us that every time the S&P 500 (^GSPC) gets to the upper reaches of its long trading range, it seems to get tested by some unwelcome macro headline. These have so far played out as minor gut checks for a listless but stable market, and it’s hard to argue with any handicapper who assumes this is just another.

One good way to avoid overthinking things is to check the list of stocks that made new highs and new lows from the prior trading day. This market has been correctly criticized for being somewhat narrow in its strength, with about half of all stocks in faltering price trends even with the indexes pressing up against the record highs.

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Yet yesterday, there were four times as many new 52-week highs as there were new lows, and the makeup of each list was fairly encouraging.

The new-high list is heavy with bank stocks - many of them regional and local institutions enjoying higher interest yields and firmer loan demand.

Brokerage firms were also rife, with Charles Schwab (SCHW), E*Trade (ETFC) Raymond James (RJF), Morgan Stanley (MS) and Interactive Brokers (IBKR). This too, is largely about rates inching higher. But as much as the market seems unattractively valued from some angles, it’s hard to get all that bearish if the brokers are so in favor.

Bellwether media and consumer names also dotting the list include Facebook (FB), Walt Disney (DIS), Macy’s (M) and Tractor Supply (TSCO). The food group is quietly strong, too, with Tyson Foods (TSN), Pinnacle Foods (PF), Post Holdings (POST) and Whitewave Foods (WWAV) all at highs, perhaps on hopes of further consolidation and restructuring of this mature business.

Over on the new lows roster, we find a lot of bond funds, other pure yield plays and some stray energy and small industrial stocks.

Meantime, Japan equities (^N225) hit a new 18-year high, homebuilder Lennar (LEN) reported decent numbers and the M&A slate remains quite heavy.

If all this sounds like a forced effort to look on the bright side, that’s fair. One could observe the list of new highs and say these are stocks ripe for corrections, and the winners are overly reliant on very recent trends of higher rates and other fragile factors.

But the market’s assessment of things is a bit more positive than negative given that the S&P 500 has gone almost precisely nowhere in half a year. And focusing on the market’s quiet message sure beats trying to read the minds of Greek and German finance ministers.


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