Stocks Getting Boost From Commercial Real Estate

While it would have seemed implausible during the depths of the 2008 financial crisis, the financial markets and economy are getting a boost from commercial real estate. According to Bloomberg:

Prices of commercial properties sold by institutional investors surged 19 percent in 2010, the second-biggest gain on record, according to an index developed by the MIT Center for Real Estate. Investments in office properties, the largest part of the market, more than doubled last year to $41.6 billion, according to Real Capital Analytics Inc., which tracks commercial property sales globally.

We made the case yesterday for a positive outlook for stocks and risk assets based on positive fundamentals and positive technicals. Today's employment report will give us something new to chew on from a fundamental perspective.

Our technical argument from February 3 referenced two market breadth indicators to monitor. It is good news that these have improved this week as of Thurday's close. However as detailed on February 3, "overbought" conditions in these measures of market breadth would give us pause. The charts below show the progress of these indicators on a weekly basis. On a daily chart, we had a mixed bag on Thursday; NYHL was down and NYSI was up.

In the post-employment report market, here are a few things we are monitoring in order to better understand the staying power of the current leg up in stock prices. The S&P 500 has very significant long-term support near 1,200, which means even a big correction would most likely not derail the bull market. See December 15 comments for more detail on the meaning of the chart below. (more)