Stocks drifted lower for the second consecutive day on Tuesday as investors continue to consolidate the gains from Friday’s forex-fueled surge. With the major averages bonking their heads on resistance levels, the bulls will need to step up soon or risk losing momentum.
In the end, the Dow Jones Industrial Average lost 0.6%, the S&P 500 lost 0.6%, the Nasdaq Composite lost 0.3%, and the Russell 2000 lost 0.1%
The economic calendar was full but didn’t attract much attention. The Consumer Price Index firmed in February — for the first increase since October — thanks to a rebound in gasoline prices. Manufacturing data was mixed, with the Markit flash manufacturing PMI improving to 55.3 in March from 55.1 in February, but the Richmond Fed index falling to -8 from 0 for the weakest result since July 2013.
New home sales were a bright spot on a surge in activity in the northeast despite severe winter weather.
Overseas, weak data out of Japan and China reinforced policy easing expectations in Asia. Eurozone composite flash PMI surprised to the upside, with both German services and manufacturing PMIs showing improvement.
Crude oil gained a touch to close at $47.49 after a Persian Gulf oil official said global oil demand is growing more strongly than expected and is looking for oil to push back toward $60 in April. After the close, oil moved higher despite reports of another big inventory build as the accumulation in Cushing, Oklahoma — a key terminal for futures pricing — was less than expected.
Twitter Inc (NYSE:TWTR) was in focus, gaining 6.2% to return to levels not seen since October on call option buying — pushing up the value of the April $50 calls recommended to Edge Pro subscribers on Monday to a gain of more than 92%.
At the sector level, financials lost another 0.9% as the sector has been the leading underperformer since last week — something I warned about when I highlighted a number of big bank stocks at risk, including Bank of America Corp (NYSE:BAC).
Technically, the push-back in the Fed’s interest-rate guidance last week and a nascent rebound in industrial commodity prices should be enough to push the NYSE Composite Index up and over resistance that’s been holding it back since July. That will usher in a melt-up phase, similar to what’s already been seen in overseas markets this year, that will push into April — at which point the vagaries of the bailout negotiations between Greece and the European establishment could present a hurdle.
But for now, it’s about upside surprises.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. You can contact the author at anthony@edgeletter.com.
