On Wednesday, stocks closed higher, led by the small- and mid-cap sectors. The Nasdaq led all other indices, up 1%, while the S&P 500 rose 0.7% with 7 of 10 sectors advancing, and the Dow industrials gained 0.6%.
Retail sales for July were flat, but rather than this being interpreted as a negative, it was seen as a positive. With the economy posting mild growth and interest rates low, the Federal Reserve isn’t likely to jump ahead of the slow economy with an increase in interest rates.
Stocks have recently been impacted by conflict in Ukraine and the Middle East, but this week has been relatively calm.
Retail stocks were hard hit following poor results from Macy’s (M), which was off 5.5%.
Most of Wednesday’s gains were made in technology, with Apple (AAPL), Facebook (FB) and Google (GOOG) leading the group, and health care, which was led by biotech stocks.
At the close, the Dow Jones Industrial Average rose 91 points to 16,651, the S&P 500 gained 13 points at 1,947, the Nasdaq jumped 45 points to 4,434, and the Russell 2000 gained 9 points at 1,142. Volume was very light on the NYSE’s primary market with just 550 million shares trading. The NYSE traded total volume of 2.7 billion shares, and the Nasdaq crossed 1.6 billion shares. Advancers outpaced decliners on both exchanges at 2.9-to-1 on the NYSE and 2-to-1 on the Nasdaq.
The iShares Nasdaq Biotechnology (IBB) jumped from its 50-day moving average at $252.90, gaining 2.2%.
The Nasdaq finally breached its narrow trading range with a clean break above both its 50-day moving average at 4,389 and 20-day moving average at 4,408. The next objective is the twin top at 4,486. MACD flashed a new buy signal.
Both the Nasdaq and Russell 2000 led the big caps higher. The Nasdaq is in the lead, and with momentum on its side and the top just 52 points away, it would be foolhardy to bet against the index.
However, small-cap stocks, represented by the Russell 2000 (see Aug. 12 chart), are still pounding away at their 200-day moving average now at 1,145. Its MACD also flashed a buy signal, so perhaps it is only a matter of time before the little guys muster enough volume to break the barrier. However, even if they do manage to overcome the 200-day, there is much overhead (i.e., sellers waiting to pounce).
The best-looking ETF is clearly IBB. Bargain hunters would do well to focus on biotechs (like the Trade of the Day) since momentum is clearly on their side.
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.