The selling pressure started in Asia on Tuesday as bourses in China and Japan suffered 1%-plus declines followed by weakness in Europe. U.S. markets opened down hard amid light volume and a sense of boredom and stagnation.
Stocks, when measured broadly, really haven’t done much since November aside from a short-lived push to incremental new highs at the end of February.
In fact, the NYSE Composite Index hasn’t really gone anywhere since last summer. As a result action feels sort of listless; like everything has fallen into the doldrums as we await the Federal Reserve’s June policy decision, which could feature the first interest rate hike since 2006.
In the end, the Dow Jones Industrial Average lost 1.1%, the S&P 500 lost 0.9%, the Nasdaq Composite lost 0.9%, and the Russell 2000 lost 0.4%.
For the quarter, the Dow lost 2% while the Russell 2000 gained 1.6%. For the quarter, the Dow finished with a 0.3% loss while the Russell 2000 gained 4%.
Trading was thin and choppy with a series of trading stoppages in volatility ETFs early in the session. That’s a sign liquidity is light.
Utilities led the way by limiting their decline, as a sector group, to just 0.1%. This has been an area of focus lately for Edge subscribers including a position in Duke Energy Corp (NYSE:DUK) that gained 1.2% today.
J C Penney Company Inc (NYSE:JCP) gained 7.4% thanks to a Q1 estimate upgrade at Piper Jaffray on better weather trends and momentum behind the company’s product initiatives.
On the economic front, the January S&P/Case-Shiller home price index showed additional strength despite slowing growth and some seasonal weakness related to the severe winter weather. Separately, the March Chicago PMI factory activity report was much weaker than expected — reinforcing the soft Dallas Fed manufacturing report on Monday.
The action has been focused in the currency market where the U.S. dollar has posted its strongest quarterly performance since 2008 (about 9%) while the euro suffered its worst quarter ever (falling roughly 11%) on a combination of divergences in the pace of economic growth and the path of monetary policy.
Overseas, oil traders are keeping a close eye on Yemen after Shia Houthis rebels entered the military base on the strategic Bab el-Mandeb Strait — which is the fourth-largest oil shipping chokepoint in the world. Oil finished with a 2.3% loss to close at $47.55.
The action should pick up later this week ahead of the Good Friday holiday in which markets will be closed for the release of the March payroll report — something that will be closely examined for clues as to what the Fed will do next.
Historically, according to Jason Goepfert at SentimenTrader, stocks have seasonally posted gains in the days before and after the Easter holiday weekend. The bullish edge is slight but fairly consistent.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
