Stocks finished flat again Wednesday after a relatively positive opening. An earnings disappointment by Staples (NASDAQ:SPLS) drove the stock down 14.6%, but Target (NYSE:TGT) rose 1.8% on better-than-expected results. Consumer prices were slightly lower than expected in July. But on the positive side, the housing index for August was up more than expected.
At Wednesday’s close, the Dow Jones Industrial Average was off 7 points at 13,165, the S&P 500 rose 2 points to 1,406, and the Nasdaq gained 14 points at 3,031. The NYSE traded 497 million shares and the Nasdaq crossed 372 million.
The S&P 500 continues to struggle with the 1,400 to 1,420 range. This back and forth has gone on so long that some of our internal indicators, chiefly the stochastic (shown) and momentum, have given weak sell signals.
Some technicians are convinced that stocks are just working off overbought conditions. The other possibility of this boring, flat range is that the market has run out of steam, and the low volume and tepid breadth number seem to support that view.
The U.S. dollar, as evidenced by the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP), may not be vaulting to higher levels, but it is inching ahead, and this is not good for stocks. It, like the S&P 500, is flashing its own signals, and since the dollar is a contra-indicator (dollar up/stocks down), these signals are telling us that the buck is headed higher.
Conclusion: While the European Central Bank (ECB) ponders its next move and the Fed stays quiet, equity folks don’t seem to know what to do. We might expect the ECB to remain mum, but our own Fed members — two of whom were interviewed on CNBC Wednesday — are at odds with each other with one claiming that we need more stimulus and the other saying that we’ve had too much already.
Now that Q2 is behind us, we can observe the health of the U.S. economy.
Corporations are making money, not from increased revenues but by pushing for more efficient operations (i.e., downsizing). Corporate insiders were very heavy sellers (2.7 billion shares) during the two-week period ending Aug. 7. This is compared to purchases of 178 million — a gross imbalance for even the high selling expected at year end and not a good sign for stocks.
Then there is the not-so-helpful government that has failed for four years to provide a statutory required budget — and finally their “falling off the cliff” scenario.
With all of this going on, does anyone out there have a reason to buy stocks?
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.