Just Don’t Ask Me Why: Nasdaq Jumps, S&P 500 Hits New High

Today, the S&P 500 finally decided to gain more than 0.1%.

Reuters

The S&P 500 rose 0.5% to 2,051.80, a record high and the end of its five-day small-move streak. The Dow Jones Industrial Average rose 0.2% to 17,687.82, also a record, while the Nasdaq Composite advanced 0.7% to 4,702.44 and the small-company Russell 2000 finished up 0.5% at 1,170.33.

It’s one of those days where trying to pinpoint the reason for the market’s optimism is downright silly. Bloomberg points to optimism about the economy–despite the lack of economic data–while the Wall Street Journal cites the possibility of market-boosting policy action in Japan and Europe. Let’s just say stocks went up today because they can.

Strategas Research Partners’ Chris Verrone and Todd Sohn aren’t surprised that the market was so quiet (until today’s breakout):

Given both the speed and magnitude of the rally off the October lows, it is likely the market is simply catching its breath. As we wrote in yesterday's work, we're still reluctant to fight seasonality this time of year. Small-caps meanwhile are still one point of concern as performance remains inconsistent (the Russell 2000 underperformed by about 90 basis points yesterday). Credit spreads have continued to leak modestly wider, and we suspect that is still weighing on the performance of some liquidity sensitive groups (e.g., small-caps, high beta, etc.).

Credit Suisse analyst Ric Deverell looks ahead to 2015:

After a period of historically low volatility, driven in part by the predictability of Fed policy, the macro world has come to life in recent months. We expect this awakening to continue over 2015, with changes in both relative economic performance and monetary conditions across regions driving major shifts in capital flows and asset pricing.

Of course, such changes are, by their nature, uncertain and rarely orderly. As the cold fronts from some central banks collide with the warm fronts from others, at the very least, we expect more market storms than seen in the past few years…

For equity markets, 2015 could be a year of two halves: we expect the S&P 500 to rally to 2200 by mid-year, notwithstanding an increase in volatility, but to give up some of the gains in the second half as the Fed comes into play.

Or maybe it will be like Pet Cemetery?