On Friday, the S&P 500 closed at its 33rd record high of the year. The Dow industrials, however, missed a new closing high by a fraction, just under the July 15 record close.
The increase was attributed to an easier money policy in Europe where the European Central Bank (ECB) entered into a program of purchasing bonds and injecting money into the market.
Here in the United States, only 142,000 jobs were added in August. That number was far short of an expected increase of 220,000 jobs. This “bad news” was interpreted as “good news” for stock prices, since it puts pressure on the Federal Reserve to delay any interest rate increases. The unemployment rate fell to 6.1%, down from 6.2% in July. September gold futures rose $0.20 to $1,265.89 a troy ounce. And the euro fell to its lowest level intraday since July, but recovered to close at $1.2952.
At Friday’s close, the Dow Jones Industrial Average rose 68 points to 17,137, the S&P 500 gained 10 points at 2,008, the Nasdaq was up 21 points at 4,583, and the Russell 2000 gained 3 points at 1,170. The NYSE’s primary market traded 610 million shares with total volume of 2.8 billion shares. The Nasdaq crossed 1.6 billion shares. On the Big Board, advancers outpaced decliners by 1.6-to-1, and on the Nasdaq, advancers were ahead by 1.3-to-1.
For the week, the Dow rose 0.2%, the S&P 500 gained 0.2%, the Nasdaq rose 0.1%, and the Russell 2000 fell 0.4%
On Wednesday, the Nasdaq Composite opened higher than Tuesday’s 14-year high and then closed lower than Tuesday’s low, meeting the requirement for a “key reversal day.” With other indices hitting new highs (Dow and S&P 500), this sets up a non-confirmation, or divergence, that must be resolved positively if stocks are to continue higher.
Conclusion
Volume has been very low. This increases volatility, especially for small- and mid-cap stocks. And it also increases the probability of false technical divergences. Nevertheless, the Nasdaq has hoisted a warning flag that can’t be totally ignored until it is replaced by a new high.
Subsequent action on Friday with the major indices closing at their highs of the day was impressive. But until the Nasdaq breaks to a new high, we do have a slight cloud over the advance.
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.
