Why Stocks Are Likely to Head Higher

Several nasty economic reports led to a lower opening yesterday. December retail sales showed a gain, but when autos were subtracted they showed a net loss, and the initial weekly jobless claims climbed to 3.63 million from 3.61 million the prior week. Continuing jobless claims were also higher.

But some better-than-expected corporate earnings from Tractor Supply Company (NASDAQ:TSCO) and Dick�s Sporting Goods (NYSE:DKS), plus a stronger euro, played a part in a rally that started at mid-morning and lasted until the close. At the bell, the Dow Jones Industrial Average was up 22 points to 12,471, the S&P 500 gained 3 points at 1,296, and the Nasdaq gained 14 points to at 2,725. Advancers were ahead of decliners on both exchanges by 1.6-to-1.

The index that hardly anyone talks about, but which had the highest total return last year, the Dow Jones Utility Average, is still plodding along. It was the story of �The Tortoise and the Hare� of Wall Street. While the public focused on gold, tech and banks, the Dow Utility Index gained 14.8%, and on top of that paid average dividends of around 3.5%.�

With the demand for power increasing as the result of a gradually turning economy, it�s likely that the stodgy �widows and orphans� stocks will continue to plod along. They may not provide the sport of trading techs and precious metals, and no one�s blood pressure will rise from worrying about them, but they do provide excellent returns — and that�s what investing is all about.

With all of the bad news of yesterday, along with some earnings misses, you would expect the market to have taken away the profits made early this week, but instead stocks march on. And here is another negative that the market is ignoring — the new AAII weekly report: bulls 29.1%, up .03%; bears 17.22%, unchanged.�

Conclusion: Investors are treating bad news favorably — a strong indication that stocks are likely to head higher before we experience the much talked about �correction.�

If you�re looking for help making profitable trades, you may want to check out my colleague Joe Burns.