Economic Data Helps Stocks Rally Early

Global markets started the day lower, with Asian markets down overnight and European bourses lower this morning. Our markets also opened weak, but quickly bottomed and have since rallied back into positive territory on the heels of some positive economic reports.

Advance Q2 GDP came in at 2.4%, just slightly below estimates of 2.5%. But there were strong upward revisions to Q1 GDP, such that it is now estimated to have posted growth of 3.7%, which is pretty strong. Of course, the bigger questions is what growth is going to look like in Q3 and Q4 of the year, given that most analysts expect a second half slowdown.

Also, Chicago PMI came in at 62.3, above estimates for a reading of 56.3. And final Consumer Sentiment for July rose to 67.8 from its preliminary reading of 66.5.

Despite the positive economic reports, bond yields are falling, back down below the 3.0% level to 2.94%. The volatility index (VIX) is fractionally higher to 24.30.

Among the sector ETFs, materials are strongest (+0.40%) so far, followed by industrials (+0.30%); tech is lagging (-0.40%) along with utilities (-0.33%).

The dollar is bouncing today at the expense of the euro. Oil prices are lower to $77.50 and gold is up a bit to $1172.00.

Trading comment: The market looks set to finish the month of July with nice gains, to the tune or approximately +7%. But the indexes are still flat to down on the year, and the S&P is still trading below its key overhead 200-day moving average.

I have talked about wanting to see benign consolidation, or light pullbacks, in the market while it works off its overbought condition. So far this has been playing out. If it continues, I think the SPX could be in position to rally above that 200-day, which would likely bring in more buyers who are currently on the sidelines while this battle plays out.