GO
Loading...

Dow, S&P hit big round numbers: Is the pullback inevitable?

Trader on the floor of the New York Stock Exchange.
Getty Images
Trader on the floor of the New York Stock Exchange.

The season of big round numbers--as in, 16,000 on the Dow Jones Industrial Average,1,800 on the S&P 500, 4,000 on the NASDAQ--is upon us.

The five-week period after Thanksgiving is traditionally one of the strongest times of the year. Then again, these "seasonal" indicators haven't worked as well in the last few years...remember "sell in May and go away" until November? During that time, S&P 500 went from 1,597 to 1,756...a 10 percent gain!

The whole weekend was dominated by 'bubble' talk: On the cover of Barron's, and in the Wall Street Journal. True, inflows into equity mutual funds have finally started showing strength, and investor sentiment indices are at bullish levels. Margin debt is also at record levels, and the VIX is near a 10-year low.

So how do you work off these overbought conditions? You pull back, and a lot of people are expecting that. It happened briefly at the beginning of this month, when the small cap Russell 2000 underperformed the S&P 500 by several percentage points. Financials have also underperformed during this period.

Elsewhere

1) Economic reform plans announced by the Chinese government have boosted Asian stocks. China's Shanghai Composite up 2.9 percent and Hong Kong jumped 2.7 percent on the news, which included easing the one child restriction, boosting private investment, and some property reforms.

2) There is a wave of Fedspeak this week....Outgoing Federal Reserve Chairman Ben Bernanke is speaking Tuesday night at the Washington Economics Club. There are plenty of other Fed speakers as well, with many of them (Minnesota Fed chief Narayana Kocherlakota and New York Fed President Bill Dudley) known to be dovish.

3) Plane maker Boeing soars to a record high after its revamped 777 saw heavy demand at the Dubai Air Show. Its 777 received more than 250 orders, demonstrating customers' trust in the aerospace giant despite the recent battery issues the plane maker has faced.

4) Potash stocks Mosaic and Potash rally on reports Russian billionaire Mikhail Prokhorov is buying a nearly 22 percent stake in Uralkali, the world's biggest potash miner. The deal is expected to be completed shortly.

5) Finally, there were reports over the weekend that NASDAQ and NYSE were close to an agreement on a plan to back up each other's data feeds. There have certainly been ongoing discussions, but it's not anything that will happen immediately. There is a lot of work to do, because the formats are different...that sounds simple, but it is not a trivial issue.

The committees are trying to come up with a way to do that. Essentially you would have to agree on what format would be used: Would there be just one template that one side or the other would utilize? And all of the customers would have to be able to switch back and forth easily as well. This is not a project that will be implemented in the next few months, but it will happen at some point

By CNBC's Bob Pisani

Symbol
Price
 
Change
%Change
S&P 500
---
US 10-YR
---
DJIA
---
NASDAQ
---
VIX OF VIX
---
SHANGHAI
---
HSI
---
BA
---
MOS
---
POT
---

Featured

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

Wall Street