Stocks traded flat Wednesday, following Tuesday’s blast-off that sent the S&P 500 to a new closing high. The indices generally held on to Tuesday’s gains despite several disappointing economic reports.
The Federal Reserve’s latest Beige Book highlighted severe weather throughout the nation that hampered retail sales. But despite this, eight of the twelve Fed districts reported “modest to moderate growth.”
The ADP employment report for February was lower than expected, coming in at 139,000 versus an anticipated 160,000, and January was revised down to 127,000 from 175,000.
The ISM non-manufacturing index fell to 51.6% in February from 54% in January, versus an expected decline to 53%.
Dow member Exxon Mobil (XOM) fell 2.8% following a forecast by the company of a decline in production and capital spending this year. Smith & Wesson (SWHC) jumped 16.4% after reporting fiscal Q3 earnings and revenues that exceeded analysts’ expectations.
At the close, the Dow Jones Industrial Average fell 36 points to 16, 360, the S&P 500 was unchanged at 1,874, and the Nasdaq gained 6 points at 4,358. The primary market of the NYSE traded 666 million shares with total volume of 3.3 billion shares. The Nasdaq crossed 2.2 billion shares. There were slightly more decliners than advancers on both exchanges.
The broad-based NYSE Composite index, like the S&P 500, has confirmed a major breakout after three attempts over a three-month period. The index’s intermediate support line has been tracking the 200-day moving average for almost two years, so that line defines major support.
Everything about this chart — its bullish MACD, the confirming new high, and a reasonable level for its RSI — lead to the conclusion that the index is headed higher.
Until last week, the financial sector has been a drag on the market. But the iShares US Financials’ (IYF) breakaway gap from a double-top on Tuesday and a new high Wednesday have placed the financials at the forefront of the current advance. The breakout is also supported by a bullish MACD.
Conclusion: Despite Wednesday’s hesitation, U.S. stock indices have an aggressive look to them. In addition to Tuesday’s breakout on high volume and strong breadth, there is evidence of renewed group rotation. For example, the financials are participating and even making up for lost time.
Sector rotation like this is a hallmark of a healthy bull market. Following such a powerful breakout, buyers are expected to limit pullbacks to shallow declines.
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.