Stocks see gains despite continued evidence of a deep recession. The Dow ($INDU) gained 62.21 points, or 0.69 percent, to close at 9,015.10. The S&P 500 ($SPX) added 7.25 points, or 0.78 percent, to finish the session at 934.70. The Nasdaq ($COMPQ) tacked on 24.35 points, or 1.50 percent, to 1,652.38. Volume was moderately stronger on the session with 1.33 billion shares traded on the NYSE and 2.18 billion shares exchanging hands on the Naz. Market breadth was positive by a 24-to-7 and 20-to-8 margin the Big Board and Naz respectively.

Economic news was a focus Tuesday with data on pending home sales, the ISM Non-Mfg. Survey and the FOMC minutes all released. The FOMC minutes showed just how concerned the committee is about the recession, especially when further deterioration could lead to deflation and a depression. We are already getting a lot of data that hasn’t been this weak since the Great Depression in the 1930s. Despite concerns about the economy, traders are staying optimistic, mostly because of a huge stimulus package promised by President-elect Obama.

Pending home sales fell 4 percent in November from October with the year on year rate down 5.3 percent. The decline in mortgage rates is starting to help the beleaguered sector, but a surplus of new homes and thousands of homes in foreclosure has kept the housing sector from bottoming. The ISM Non-Mfg. Survey was better than expected in December, coming in at 40.6 compared to 37.3 in November. Expectations were for a reading of 37.0 with gains in new orders and the employment index providing some hope of a bottom.

Shares of Dow Chemical (DOW) saw strong gains Tuesday, up 6.6 percent to $16.05. The company was hurt in December following news the Kuwaiti government had backed out of a multibillion dollar partnership. Today, Dow shares gained ground on reports the company would use legal action again Kuwait, but the company is also looking at other partnerships.

Alcoa (AA) sent shockwaves through the market after hours when the aluminum giant announced it would cut 13 percent of its workforce. This equates to about 13,500 jobs. Cuts will also be made in Alcoa’s contract work force, along with cuts in salaries and the closing of several plants. In regular hours trading, AA shares rose 2.2 percent to $12.12, but the stock is down more than 4 percent in after-hours trading.

Wednesday will see the release of several jobs related reports and this could create some movement in the stock market. Nonetheless, unless Wednesday’s data is well below expectations, stocks are unlikely to break through resistance. Even so, the bulls are hoping a better than expected nonfarm payrolls report Friday will provide the strength needed to break through resistance.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site