The S&P 500 Continues To Defy Gravity

Markets are higher in early trading, but as yesterday's action demonstrated, there could still be lots of twists and turns in trading as the day wears on.  Yesterday the market gave up all of its early gains and posted fairly sizable losses around midday before recouping all of those losses and finishing back in positive territory.

One puzzling thing is that with so much intraday volatility one would expect the volatility index (VIX) to be trading at higher levels.  Today the VIX trades below the 14 level near 13.87.  That is a pretty low reading for the VIX and not one that indicates traders expect heightened volatility.  Go figure.

In economic news, the Case-Shiller home price index for February rose 12.9% vs. year-ago levels.  That is a nice gain, although it represents a bit of a slowdown.  I would expect to see March and April readings moderate even further. 

Earnings season continues apace with plenty of mixed results in terms of the reaction in stocks.

Stocks rising on earnings: MRK, S, LKQ, AMG, CMI, PH, FDP, UTHR, SU, BWLD

Stocks falling on earnings: ADM, OSK, BSX, WAT, BMY, GT, DDD, IPGP, ABB, SAVE, CIT

Asian markets were higher overnight.  Japan was closed for a holiday.

Europe's markets are also higher this morning.  Great Britain's GDP rose 3.1% on an annual basis, pretty solid.  Spain's unemployment rate ticked higher to 25.9% from 25.7%.  And Russian troops that were huddled on the Ukrainian border have returned to their base.

The 10-year yield is a bit higher to 2.70%, which is right at its 50-day average.

Trading comment: While the Nasdaq has experienced a full-blown 10% correction in the last six weeks, the S&P 500 only dipped a little more than 4%.  That's a bit unusual, but the market can do anything at anytime. While we are still not out of the woods yet with the Nasdaq, mid-cap and small-cap indexes still below their respective 50-day averages, it is looking more like this correction may have seen its lows for the time being.  We are going to look to start to put more cash to work in equities with the view that we could see another bounce going into early summer.