Daily Insight

U.S. stocks gained ground for a second-straight session, pushing to a new 17-month high. The broad market hasn’t endured a significant sell-off (which I’ll define as more than a 1% move) in 20 sessions. The market appears to be strangely complacent as just one of the five down days during this 20-session stretch has been to the degree of 0.5% and three have been only fractional losses.

The National Association of Realtors reported that existing home sales came in a bit better-than-expected during February, showing activity fell 0.6% for the month. This followed record declines during the previous two months. Even though the headline figure beat expectations, the inventory data within the report suggested trouble lies ahead for home prices. As a result, stocks moved into negative territory following the report. However, comments from two Fed officials suggested that the central bank was likely to remain extremely accommodative for longer than the market had previously expected and that gave fuel to a rally that began around lunch and accelerated in the final 30 minutes of trading.

Specifically, it was the later of the two speeches, delivered by San Francisco Fed Banks President Janet Yellen, that was likely behind the rally late in the session. She stated: “The economy will be operating well below its potential for several years.” The market hears that and gets juiced that the Fed will keep monetary policy floored for well beyond a six month time frame.

Not surprisingly, commodity-related basic material stocks led the rally – the commodity trade rolls on dovish Fed comments. Industrials and tech were the other leaders. All 10 major sectors gained ground on the session.
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