The broad-based S&P 500 closed at a record high Thursday, following the easing of pressure from the semi-settled government funding crisis. But the Dow Jones Industrial Average fell due to weak earnings from three of its components.
IBM (IBM) and Goldman Sachs (GS) ended the day with losses of 6.4% and 2.4%, respectively, as both companies reported revenues that failed to meet analysts’ estimates. UnitedHealth Group (UNH), another Dow component, fell 5.1% after meeting earnings estimates but also failing to meet revenues expectations. However, Verizon (VZ) gained 3.5% on a better-than-expected earnings report.
The only economic news of note was from the Philly Fed. Its Business Outlook Survey fell to 19.8 from 22.3 last month, but that is good news since the consensus expected it to fall to 7.0.
At Thursday’s close, the Dow Jones Industrial Average was off 2 points at 15,372, the S&P 500 rose 12 points to 1,733, and the Nasdaq jumped 24 points to 3,863. The NYSE traded 760 million shares and the Nasdaq crossed 499 million. On the Big Board, advancers exceeded decliners by 4.9-to-1, and on the Nasdaq, advancers were ahead by 2.1-to-1.
The Nasdaq broke a 13-year high, rallying to its best level since September 2000. It continues to trade in a powerful bull channel that began in November and has advanced over 35% since then.
The index accentuated its move by flashing a new MACD buy signal, which suggests that it may even slice through the top of the bull channel at 3,864.
The Russell 2000 small-cap index rose to a new all-time high. Like the Nasdaq, it too flashed a buy signal from its internal MACD indicator.
Conclusion: Even though the S&P 500 made a new high Thursday, it struggled all day to do so, and the Dow actually fell several points. The small-cap and mid-cap stocks of the Russell 2000 and Nasdaq, which are much more volatile and also more speculative, continue to garner the attention of money managers.
Along with the new highs is an indication that the public is finally getting involved. The AAII Sentiment Survey’s bullish reading jumped from 36.05% on Sept. 26 to 46.28%, while its bearish reading fell to 24.92% from 30.61% during the same period.
Since the AAII survey is a contra-indicator, it means that a caution flag is flying from this source. But for traders and those willing to take on a higher degree of risk, small caps and mid caps appear to be where the quick money is being made.
Nevertheless, there is much disappointment over the results of Washington’s handling of the debt ceiling and budget conflicts. However, punting the ball until the January/February deadlines does discourage the Fed from easing back on their monthly bond purchases, and this alone could keep the bull on its feet for several more months.
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.