Stocks opened lower Wednesday as European news of more banking problems surfaced. However, when the closing bell sounded, most of the early losses had vanished as buyers took encouragement from earnings gains by some leading blue-chip stocks.
3M Company (NYSE:MMM) topped the Dow list, gaining 1.18%. Johnson & Johnson (NYSE:JNJ) rose almost 1%, and The Walt Disney Company (NYSE:DIS) was up 0.42% as a result of reporting earnings that exceeded analysts’ estimates.
At Wednesday’s close, the Dow Jones Industrial Average was up 7 points to 13,987, the S&P 500 gained 1 point to 1,512, and the Nasdaq fell 3 points to 3,168. The NYSE traded 681 million shares and the Nasdaq crossed 452 million. Advancers led decliners on the Big Board and Nasdaq by 1.3-to-1.
I like to occasionally refer to the NYSE Composite index for guidance, since it is comprised of every equity traded on the New York Stock Exchange.
It was the first of the major indices to break from the consolidation that began in September with a powerful breakaway gap, and it made a new high as recently as Friday.
The first support for the index is at its 20-day moving average at 8,823, then the uptrend line at about 8,700, and finally its 50-day moving average and support line at about 8,560. Like the other indices, its MACD is overbought, but that is not important until the short-term trendline at 8,700 is broken.
Monday’s sell-off was the worst of the year and startled many investors with its ferocity. However, the S&P 500 proved its resilience by reversing on Tuesday to a new intraday high. This remarkable performance demonstrates the power of the current bull market and should encourage those who have not yet become convinced to sell their bonds, reduce their non-interest bearing deposits, and put the proceeds to work in high-quality stocks paying strong dividends.
Conclusion: Investors who have not yet made a long-term commitment should step up and do it now. Traders may want to wait for a short-term correction, but long-term buyers should not be influenced by daily, or even weekly, stock market gyrations.
Blue-chip stocks offer relatively high dividend returns versus nothing in money market funds — plus, they offer the probability of an additional 5% to 15% appreciation in 2013.
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.