Stocks gained on Friday, but it was a volatile, low-volume session that failed to overcome the week’s earlier losses. For most of the session, stocks seesawed, but a sharp rally early in the afternoon held until the close.
Several things were blamed for last week’s unrest. One was the performance of the bond market. Most analysts have been looking for rising rates and falling prices, and the opposite is occurring. The 10-year Treasury note settled at 2.52% on Friday, down from 3% at the end of last year. And earlier in the week, well-known hedge fund manager David Tepper advised against having a strong position in stocks.
At Friday’s close, the Dow Jones Industrial Average rose 45 points to 16,491, the S&P 500 gained 7 points at 1,878, and the Nasdaq gained 21 points at 4,091. The NYSE primary market traded 9.9 million shares with total volume of 3.2 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 2-to-1, and on the Nasdaq, advancers led by 1.5-to-1.
For the week, the Dow fell 0.6%, the S&P 500 broke even, the Nasdaq rose 0.5%, and the Russell 2000 fell 0.4%.
The S&P 500 made a new all-time high just four sessions ago, but on Thursday, it reversed from its new high. Then, on Friday, it closed above the 50-day moving average, cancelling out Thursday’s reversal.
Last week, the Russell 2000 barely survived a major breakdown. On Thursday, the index ended close to the high of the day, negating an intraday threat to the February low at 1,083. And Friday’s close at the high of the day supports Thursday’s more bullish action.
Conclusion: The S&P 500 remains bullish as Thursday’s mildly negative action was cancelled by Friday’s rally. Volume increased on Thursday’s pullback, but downside volume exceeded upside volume by just 4-to-1 on the NYSE and by 2.5-to-1 on the Nasdaq. Most analysts look for at least two 9-to-1 down days as a negative signal. And the Russell’s reversals on Thursday and Friday are favorable near-term bullish events.
However, with volume relatively light, volatility usually increases. That means a sharp move in either direction is possible. For now, I remain modestly bullish, but recommend dropping the ratio of investments to 60% stock/40% cash.
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.