Stocks closed mixed on Tuesday following earnings reports that were also mixed. While the Dow industrials suffered a nearly triple-digit fall, down 0.5%, and the S&P 500 lost 0.2%, the Nasdaq rose 0.4%.
Investors shied away from global stocks, and the domestic mid caps of the Nasdaq and small caps of the Russell 2000 garnered most of the day’s buying.
The focus remained on earnings and acquisitions. Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) made a $40.1 billion bid for Mylan NV (NASDAQ:MYL). TEVA jumped 1.4%, and MYL, which I featured as the March 9 Trade of the Day, jumped 8.9%. They helped push the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) up 1.8%.
Consumer discretionary stocks were one of the better performing groups, with Consumer Discretionary SPDR (ETF) (NYSEARCA:XLY) up 0.1%.
D.R. Horton, Inc. (NYSE:DHI) gained 1.9% ahead of its earnings announcement today. The iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB) gained 1.4%.
Travelers Companies Inc (NYSE:TRV) fell 4% following an earnings miss, making it the worst performer of the Dow industrials. E I Du Pont De Nemours And Co (NYSE:DD) was the second worst Dow performer, falling 3% after missing estimates.
FactSet said that with 77 companies of the S&P 500 reporting so far, Q1 earnings are on track to fall 4.2% from a year ago. This estimate is based on already reduced earnings forecasts.
Gold futures rose 0.8% to $1,202.90 an ounce. And oil prices fell 2% to $55.26 a barrel. The 10-year Treasury note’s yield rose to 1.92% from 1.90%.
At Tuesday’s close, the Dow Jones Industrial Average fell 85 points to 17,950, the S&P 500 was down 3 points at 2,097, the Nasdaq jumped 20 points to 5,014, and the Russell 2000 was off less than a point at 1,264.
The NYSE’s primary market traded 690 million shares with total volume of 3.2 billion. The Nasdaq crossed 1.7 billion shares. On both exchanges, advancers and decliners were almost even.
The sideways consolidation in the Dow Jones Industrial Average took a hit Tuesday as the index fell from its resistance line, closing below its 50-day moving average at 17,965. MACD is turning down after failing to penetrate February’s high.
Even though the Russell 2000 closed higher, it advanced by just a fraction of a point. Its high of the day, at 1,270.08, came close to closing the gap at 1,264.22 to 1,271.11 — in fact, close enough to call it “closed.” But following its high of the day, made on the opening, it retraced almost all of the early advance.
Conclusion
The two charts featured here today offer an interesting comparison. The Dow is consolidating following a new high in March. However, low volume and uneven breadth are not marks of a near-term continuation of the uptrend.
Meanwhile, the Russell 2000, which is in a powerful bull channel, should have easily closed the gap mentioned. Instead it turned away from its strong opening and MACD continued to drift lower.
Unless we see a new high from either the small and mid caps, or the S&P 500 and Dow soon, my appraisal is that until late September to October the stock market will continue at a slow, sideways pace with at least one major correction down to the 200-day moving averages of the major indices.
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.
