Stocks Follow Overseas Markets And Power To New Highs

Asian markets rallied overnight, and that along with the dollar trading lower again set the tone for a positive open in the stock market. One of the things that helped boost sentiment in Asia was the leaders of the Asian Pacific Economic Cooperation pledging to maintain stimulus measures.

Last week, the Dow made a new high for the year, and today the S&P 500 and Nasdaq have joined the party. What is notable is that while small-caps led the earlier part of the rally this year, the baton seems to getting handed off to the large-caps.

There was also a couple of good economic reports. Advance retail sales for October rose +1.4% vs. expectations for an increase of +0.9%. Also, business inventories showed a -0.4% decrease for September, which isn't as bad as the -0.7% decrease expected.

In the "where is the inflation?" department, the 16-country Eurozone reported that consumer prices fell -0.1% vs. year-ago levels, the 5th consecutive annual decline. Sounds more like deflation to me, but don't tell that to the inflation hawks, they will call you a Pollyanna.

The weaker dollar is boosting commodity prices also, with gold making new record highs above $1130, and oil prices back above $78. The 10-year yield is lower to 3.39%, and the VIX is also lower to 23.10.

Trading comment: With the S&P and Nazz powering to new highs, liquid large-cap stocks are leading the way. We've seen this play out before, and it makes it likely that many of these stocks will continue to lead into year-end as portfolio managers continue to add to their favorite names. I said last week that I was looking to buy any dips, and that continues to be my mantra for now.