Within an hour of Tuesday’s opening, both the Dow industrials and S&P 500 hit new record highs, with the latter crossing 1,900 for the first time. The strong opening ignored a weaker-than-expected April retail sales report, but the rally didn’t last, as selling in small caps took its toll.
Biotech stocks were strong at the opening, but they too succumbed to selling. The iShares Nasdaq Biotechnology (IBB) closed down 0.6% after being up almost 1% at the day’s high. But the Dow Jones Transportation Average rose to a new high and held it for a gain of 0.5%.
At the close, the Dow Jones Industrial Average rose 19 points to a new record closing high of 16,715, the S&P 500 gained just 1 point but also made a new closing high at 1,897, and the Nasdaq was down 14 points at 4,130.
The NYSE’s primary market traded 604 million shares with total volume of 2.8 billion shares. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners led advancers by a ratio of 1.24-to-1, and on the Nasdaq, decliners were ahead by 1.94-to-1.
The S&P 500 broke from an inverse head-and-shoulders formation with the head at 1,813 and the neckline at 1,885. The breakout renders a target of 1,957 (1,885-1,813 = 72 + 1,885 = 1,957).
The Dow transports have broken to a new all-time high again. This coincides with a break to another new high by the industrials and again confirms that a Dow Theory bull market is under way.
Since the transportation index is considered an economic bellwether, it is telling us to expect the last two quarters of this year to be economically strong.
Conclusion: The minor profit-taking in the technology sector is of little consequence. The most important indicators were the powerful new high by the Dow transports and the S&P 500, since together they predict better economic conditions before the end of this year.
And there have been other positive economic indicators, as well. ChangeWave Research noted accelerating momentum it its April consumer spending survey. ChangeWave analyst Josh Levine commented: “The top line showed the best overall spending outlook of the past three years. Additionally, U.S. consumer expectations continued to improve.” Additionally, the research showed people are spending more at restaurants, and on the business side, corporate spending is at a three-year high.
This is all good news, especially for our readers who have questioned the current rally’s economic basis. The market is often the best predictor of the economy. For six months, the Dow Jones Transportation Average has been telling us to expect an economic upturn. The bull market has been confirmed, so ride that bull.
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.