(eToro Blog) Wall Street sentiment got a boost from Chinese data, which suggests that the Asian giant is experiencing a soft landing as their government had hoped. Transportation stocks led the major indexes higher despite the continued climb in oil prices. Overall, stocks were boosted by better than expected consumer credit data.
After the bell on Monday, the U.S. Federal Reserve reported an increase in consumer credit which experienced the biggest jump in the past ten years. The robust change in credit confirms the improving employment picture as well as the resilience of the U.S. consumer. According to the data, consumer credit increased to $20.4 billion in November, much greater than the $5.0 billion expected by economists’ consensus. This news, combined with improving employment figures and stabilizing housing numbers paints a picture of an economy that is gaining traction.
Non-revolving credit rose 10.7% or $14.8 billion to $1.68 trillion, attributed to an increase in federal student loan funding. The change in revolving credit, which includes credit cards, rose more than $5 billion dollars which shows strength in consumer spending; U.S. consumer credit has increased in 13 of the past 14 months.
Wall Street stock prices were given a lift following a surge in Chinese stocks, which were up nearly 2.7% on Tuesday, after a similar climb on Monday. Chinese stocks got a lift from slightly dismal export numbers as weakness in the sector is likely to lead to additional interest rate cuts. China’s trade numbers were much lower than expected; imports were 11.8% versus expectations for 18.0%. Declines in imports came from the U.S., falling 2.7%, and from Japan, falling 4.6%. The Chinese trade surplus was significantly higher than expected, but was still low historically. For 2011 as a whole, the surplus was $155 billion, the lowest level since 2005.
Also giving stocks a jolt was better than expected economic data out of Europe. French industrial production was better than expected, rising 1.1% on a month over month basis versus -0.2% consensus call, and 0.1% in the prior month. Most of the recent European data has been mixed to lower, making the surprise in France’s figures more than welcome.
Stocks seemed to rally right from the opening bell, but failed to show a substantial break out, despite the Nasdaq moving higher for 4 straight trading sessions. Transportation stocks continued to help the major average climb, as large cap stocks such as UPS and Fedex pushed higher.
Technically, the major averages are climbing toward resistance and could break out if the market closes above 1290 for the S&P 500 Index. The large cap index is following the transports higher, and solid volume is accompanying the positive momentum. The 50-day moving average is closing in on the 200-day moving average, which has historically been positive for stocks. This technical scenario has already occurred in the Dow Industrials. Support on the large cap index is seen near the 200-day moving average at 1258. The RSI on the S&P 500 climbed above 64, which is not overbought, but reflects positive upward momentum.
At the same time, volatility continues to remain in a tight range and has failed to decline to levels seen prior to the recent spark of the E.U. debt crisis. The VIX is now trading close to 20.5%, and a close below 19% would signal a move back toward 17.5%.
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