Update: Stocks Edge Higher With Focus On Fed Tapering

Stocks are edging moderately higher this morning after a better than expected trade report underscored the underlying economic recovery, but investor focus has already turned to a couple of Fed speakers later today, as the market looks for additional clues as to whether the Fed will begin trimming its monthly bond purchases. Also, the DJIA continues to make headlines as it goes for 21 straight positive Tuesdays.

As of 10:45AM, the S&P 500 is up +0.3% to 1,645 (back above the 1,635 technical support level), while the DJIA is up 33 points to 15,287.

Main Factors Driving Early Trade:

– Positive Economic Data – On the heels of concerning global PMI’s and a rough ISM print yesterday, investors are digesting a couple of positive U.S. economic data points this morning. CoreLogic provided more evidence of a rebound in housing as prices rose 12.1% in April from a year ago, the fastest rate since February 2006. In March, home prices climbed 10.5% from a year earlier. Separately, the U.S. trade deficit climbed 8.5% to $40.3 billion in April from a revised $37.1 billion in the prior month, as imports from China surged after the end of a major holiday season in that country. Many see the solid trade report reflecting the underlying recovery, with positive exports/imports indicating better domestic economic activity.

– Fed Tapering Or Not – The past few weeks have been all about whether the Fed will taper its accommodative policy or not, and what that means for the markets. Stocks rallied late yesterday, after disappointing factory data and comments from Federal Reserve Bank of Atlanta President Dennis Lockhart, who noted that the central bank is committed to its record stimulus program. Two voting members of the FOMC will speak later today: Gov. Sarah Bloom Raskin at 12:30 p.m. EDT on the role of government in jobs creation and Kansas City Fed President Esther George at 1:30 p.m. EDT on the economy. Raskin has cast her vote for every decision this year, while George has cast hers against them all.

– Market Streak vs. Hindenburg Omen – The DJIA index has closed higher for the last 20-consecutive Tuesdays, the longest streak in history, as it goes for 21 today. Technical traders, however, will be paying close attention to the “Hindenburg Omen” indicator. A mix of several technical indicators, the “Hindenburg Omen” typically signals a high probability that the stock market will crash. Several conditions need to be met, but it’s mostly correlated to the dispersion between new 52 week highs and lows on the NYSE. It’s getting a lot of attention as we last saw this “omen” in October 2007.

– Japanese Markets – The volatile Nikkei bounced 2% overnight despite the yen strengthening below 100 overnight. Monthly wages in Japan increased 0.3% year-over-year in April, to 273,427 yen (about $2,746), the biggest increase in over a year and suggests that Abenomics is working. All eyes will be on Prime Minister Abe tomorrow morning as he speaks about his three planks, or “Third Arrow,” of his growth strategy for the economy.

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