Stocks Advance Despite Signals of More Tapering

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Stocks soared on Tuesday despite a better-than-expected report on retail sales and pro-taper speeches by two FOMC members.

It was only a few months ago when news reports such as those we received on Tuesday would have sent stocks crashing. The U.S. Commerce Department’s Census Bureau reported that on a monthly basis, retail sales increased by 0.2 percent in December, beating economists’ expectations of a 0.1 percent increase. Excluding automobiles, retail sales increased by 0.7 percent in December, despite economists’ expectations of a less-significant, 0.4 percent increase.

Strong retail sales used to be scary news because it would be seen as encouragement for the FOMC to initiate the cutbacks to the U.S. Federal Reserve’s monthly bond purchases. Not only did the stock market fail to collapse after the upbeat economic data, but it also survived some pro-tapering speeches by two voting members of the FOMC: Dallas FedHead Richard Fisher and Philly FedHead Charles Plosser. Instead of a mass panic attack, we saw a significant stock market advance on Tuesday.

The Dow Jones Industrial Average (NYSEARCA:DIA) picked up 115 points to finish Tuesday’s trading session at 16,373 for a 0.71 percent gain. The S&P 500 (NYSEARCA:SPY) climbed 1.08 percent to close at 1,838. The Nasdaq 100 (NASDAQ:QQQ) jumped 1.93 percent to finish at 3,580. The Russell 2000 (NYSEARCA:IWM) surged 1.34 percent to end the day at 1,163.

In other major markets, oil (NYSEARCA:USO) rose 0.70 percent to close at $33.04. On London’s ICE Futures Europe Exchange, March futures for Brent crude oil declined 72 cents (0.68 percent) to $105.25/bbl. (NYSEARCA:BNO). February gold futures declined $1.10 (0.09 percent) to $1,244.30 per ounce (NYSEARCA:GLD). Transports were climbing above the clouds on Tuesday, as the Dow Jones Transportation Average rose 1.28 percent (NYSEARCA:IYT).

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