Stocks traded sideways for most of Monday as investors hesitated before several postponed economic reports. The key employment data figures that were originally scheduled for Oct. 2 will be released today.
The Nasdaq closed at a new 13-year high despite a lower close by the Dow industrials. The Dow closed lower as a result of McDonald’s (MCD) falling 0.64% on a lower outlook for October sales, Boeing (BA) dropping 0.86%, and Wal-Mart (WMT) losing 0.74%. A 2.31% gain in General Electric (GE) failed to overcome the other losses. And JPMorgan Chase (JPM) was unchanged after a tentative agreement to pay $13 billion to end a number of civil investigations into its sale of mortgage securities.
At Monday’s close, the Dow Jones Industrial Average was off 7 points at 15,392, the S&P 500 was unchanged at 1,745, and the Nasdaq rose 6 points to 3,920. The NYSE traded 678 million shares and the Nasdaq crossed 424 million. Decliners led advancers by a slight margin on both exchanges.
The NYSE Composite made a new closing high on Friday, and a new intraday high Monday at 9,996. Its MACD indicator is bullish, and other internal indicators are not extremely overbought despite the index’s new high.
However, the Nasdaq is moving ahead with all of the gusto of a young bull. Its MACD indicator is not overbought despite the new 13-year high. Technology is the driving force behind the Nasdaq, as it is with the S&P 500 (not shown), which was up fractionally, closing at a new all-time high.
Conclusion: The bull market is in full swing despite the ineptitude of politicians and their appointees. If today’s jobs number fails to meet expectations, the market may have a hiccup, but the trend is strongly in favor of the bulls.
But the bears, as summarized in StreetSmart.com, still voice a negative summary of why investors should sell: “Buy the rumor, sell the news.” And yes, I used that one myself last week with regard to the appointment of the new Fed Chairwomen, Janet Yellen, and the punting of the debt issue.
Then there is the fact that the S&P 500 is selling at 19.2 times earnings, which is near the high of its historical range, while earnings growth is slowing. And this year’s winner of the Nobel Prize for Economics, Robert Shiller, the developer of the Cyclically Adjusted Price-Earnings (CAPE) Ratio, said, “U.S. stocks are vulnerable to losses because they are the most expensive relative earnings in more than five years.” But, StreetSmart.com pointed out that his CAPE ratio at 23.7 at the end of September is still lower than its peak of 27.5 in 2007, and well below the record peak of 44.2 in 1999.
Those of us who lived through the dot-com bubble of 1997-2000, with its climax on March 10, 2000, at Nasdaq 5,408.6, shudder at such comparisons.
Despite all of the negative hyperbole, all three trends (short, intermediate and long-term) are bullish. And so the well-worn expression “Don’t fight the tape” seems most appropriate. But don’t be afraid to nail down a profit either.
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.