U.S. Markets closed

Stocks tread water after record close

David Russell (david.russell@optionmonster.com)

Stocks are little-changed this morning after breaking out to new highs on Friday.

S&P 500 futures are treading water, while European markets are mixed. Asia was mostly higher in the overnight session, led by a gain of more than 1 percent in Shanghai. The Japanese yen is also falling, which bodes positive for risk taking.

The S&P 500 appears to have broken out of so-called bullish triangle pattern, marked by higher lows in June, late-August, and October. That could make some chart watchers believe that it will continue to advance. The Russell 2000 small-cap index has been even stronger.

Sentiment has been extremely as positive large amounts of cash on the sidelines keeps money flowing into equities. And, while the economy has been expanding, it's growing slowly enough to keep a lid on interest rates.

The strength has also been well dispersed across the market, with no single sector or group clearly dominating performance. While energy has been a major driver to the upside, our researchLAB market scanner shows financials gaining momentum in the last month as recent quarterly reports show asset quality improving.

Another emerging trend has been money flowing into international stocks: While the S&P 500's 22 percent year-to-date gain makes the United States the third best country tracked by researchLAB in that period, it's in the bottom half over the last month as investors opt for markets such as Spain, Italy, India, and Australia--all of which stand to benefit from a stronger global economy.

Attention now focuses on corporate earnings. Major companies reporting today include McDonald's, Hasbro, and Halliburton. HAS is indicated higher by almost 4 percent after profit and sales beat expectations. HAL and MCD fell after missing forecasts on the top line.

The calendar of economic news is relatively light, with the Chicago Federal Reserve's regional economic index at 8:30 a.m. ET and existing home sales at 10 a.m. ET as the main data points. Tomorrow also brings a belated September non-farm payrolls report, delayed by the recent government shutdown.

There are a few interesting developments in currency and foreign-exchange markets. First, the Japanese yen continues to weaken and appears to have broken a long-term consolidation pattern against the greenback. Second, while oil is negative, West Texas Intermediate is down more than 1 percent versus a 0.4 percent drop for Brent crude. That price mix is usually bullish for refiner stocks. Third, gold and silver are both up and continue to work their way higher from June's multi-year lows.

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