The S&P 500 broke the 1,500 ceiling recently, smashing through a major psychological threshold on the road to the 2007 all-time high of 1,565.15. This is particularly exciting considering the persistently flagging performance of the biggest component on the index, Apple (AAPL), and something which clearly illustrates how much banking and commodity stocks have helped bolster performance across the board. Apple is around 35% off its September high and obviously the S&P would be higher if not for this fact.
Bank and commodity share performance also helped peg the 5-year high for the Dow, pulling hard and fast out of the corner after the U.S. stock market closure in observance of MLK, Jr. Day. Stabilization of the U.S. debt limit issue, combined with roundly positive economic data out of China and steadiness in the EU going into the World Economic Forum in Davos, has left markets with a sense of confidence in long-term global growth potential.
While bearish blips may hamper the mounting data points, the robustness of broader market fundamentals is an unmistakable tell about overall global economic throughput going into 2013. Elements of this performance landscape, like better than expected Q4 figures out of major tech vendors such as Google (GOOG), who saw a nice uptick in revenue for the last quarter, or IBM, which also saw expectations exceeded for revenue and earnings, further sweeten the fuel mix that has markets firing on all cylinders. On the whole, S&P Q4 earnings are forecast up 0.7% over the initial 1.9% target determined at the season’s outset.
While everyone was expecting some of the major tech sector players to be hedging their bets over concerns about the fiscal cliff, the numbers going into 2013 don’t lie and we have a strong indication here that technology and software areas will even improve moving forward. Often looked upon as an accurate gauge of future U.S. economic performance, the Dow’s transportation index similarly set a new high, up nearly 10% so far this year, crushing broader indices.
Also hitting 5-year highs we have U.S. home sales, which rebounded nicely to over 4.65M sales last year, again mapping the index data as being the highest since 2007, with a 9.2% jump from 2011. While this remains under the ideal level of 5.5M, seen as a standard measurement of a healthy housing market, given the underlying economic reality and market track record in recent years, the data is very positive, especially since overall inventories fell to the lowest level in 12 years with only 1.82M homes for sale. Analysts are bullish on housing market recovery and 2013 looks like it will extend the trend as liquidity improves, with record low mortgage interest rates and improving sentiment towards world economic growth comingling with impressive elasticity from the major index entities.
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