The S&P 500 decisively closed above 2,000 on Tuesday. After struggling for weeks to crack the psychological barrier, it squeaked past it by a slight margin. And the Dow Jones Industrial Average hit a new intraday high but failed to make a new closing high.
Buyers were encouraged by a rosy consumer confidence number. The Conference Board’s index rose to 92.4, up from 90.3 in July, versus an expected decline to 88.5.
Burger King Worldwide (BKW) fell 4.3% after agreeing to buy Tim Hortons (THI), which rose 8.5%, and move its headquarters to Canada. Amazon.com (AMZN) was up 2.3% after announcing it would acquire streaming platform Twitch Interactive for $970 million in cash.
Biotech stocks outperformed for the second consecutive day, pushing the iShares Nasdaq Biotechnology (IBB) up 1.1% to a new high. The financial sector also did well, with Citigroup (C), JPMorgan Chase (JPM) and Deutsche Bank (DB) gaining.
Durable goods orders saw a big jump in July. Analysts had expected a 7% increase and instead were surprised by a 22.6% leap. Most of the gain was due to heavy orders for aircraft and parts from Boeing (BA).
At Monday’s close, the Dow Jones Industrial Average rose 30 points to 17,107, the S&P 500 gained 2 points at 2,000, the Nasdaq climbed 13 points to 4,571, and the Russell 2000 was up 10 points at 1,175. The NYSE’s primary market traded over 504 million shares with total volume of 2.4 billion shares. The Nasdaq crossed 1.5 billion shares. On both major exchanges, advancers outpaced decliners by about 1.9-to-1.
Like the S&P 500, the Dow transports have struggled to make a new high, but the bullish “V” formation is a strong indicator that it, like the S&P 500, will push into new ground. In the event that it falls back, the first support is at the 50-day moving average at 8,197.
The Dow industrials were successful in jumping to a new intraday high, but failed to hang onto the gain through the close. However, like the transports, the industrials have solid support at the 50-day moving average. And, absent any unforeseen events happening abroad, will likely run to a new closing high in the next week or so.
Despite the lack of support from the average investor, the stock market is rolling along. And with the S&P 500’s P/E ratio at a mere 17.5, it is likely that my 2014 target of S&P 500 2,200 and Dow 17,779 may be too modest.
The low volume is characteristic before a major holiday, especially Labor Day. Many folks are thinking more of vacation or back-to-school preparations than they are of stocks.
Looking ahead, the two weeks after Labor Day tend to be a time when portfolio managers “clean house,” according the Stock Traders Almanac.
Again, I suggest readers beat the big boys to the punch and rid their portfolios of laggards now. The day after Labor Day may also be a good day to sell, since in 13 of the past 19 years, that day was up.
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.
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