Sam Collins

The Market is Overbought … but Who Cares?

by Sam Collins   08/05/09

The market was up again yesterday. And again it wasn't earnings but an unexpected bonus from an economic report that was the catalyst for buyers to part with more cash.

A surprisingly large increase in pending home sales and a positive reaction to the report by the financial industry drove stocks to new highs. It was the fifth straight month of gains for pending home sales.

The first report of the day was June personal income, and it fell a larger-than-expected 1.3%, while June spending made an expected 0.4% increase. That and tepid corporate earnings from lesser-named companies had the major averages flat until the home sales report.

Here are some of the early morning earnings:

• UBS (UBS), the Swiss bank, fell 7.6% on its seventh loss in eight quarters.
• Archer Daniels Midland (ADM) fell 5.2% after reporting an 83% decline in quarterly earnings.
• Toyota Motors (TM) reported its third straight quarterly loss.
• Before the opening, the European exchanges were lower on disappointing earnings from Siemens (SI).
• Utility stocks fell 1.5% after PPL Corp. (PPL) reported weak earnings and a poor outlook for the remainder of the year.

In the financial sector, it was the REITS that reacted most to the housing news. Apartment Investment & Management Co. (AIV) rose 8.57%, Kimco Realty (KIM) gained 7.53%, and ProLogis (PLD) rose 6.06%.

The banks reacted to it, too, with Wells Fargo (WFC) up 2.91%, Bank of America (BAC) up 2.09%, and JPMorgan Chase (JPM) up 1.54%.

At the close, the Dow Jones Industrial Average (DJI) had gained 34 points to 9,320, the S&P 500 (SPX) rose 3 points to 1,006, and the Nasdaq (NASD) was up 3 points to 2,011.

On the Big Board, advancers were ahead of decliners by 8-to-5 with volume of 1.2 billion shares trading. The Nasdaq traded 656 million shares with advancers ahead by less than 7-to-5.