On Tuesday, stocks rose for the fourth consecutive session in a broad advance that regained important technical ground for the major indices. The Nasdaq led the pack, up 0.7%, with the Russell 2000 close behind, up 0.6%. The defensive Dow Jones Utilities Average fell 0.1%, the sole loser among the major indices.
European stocks also rose with France’s CAC 40 up 0.7% and Germany’s DAX up 0.3%.
The Dow Jones Industrial Average advanced 0.4%, pushed higher by JPMorgan Chase & Co. (JPM), which reported a 5.2% increase in Q2 EPS. The stock was up 1.4% for the day and added 6 points to the Dow. Wells Fargo & Co (WFC) said Q2 profits were down slightly, and revenue missed estimates. But earnings matched analysts’ forecast and shares rose 0.9%.
Soft sales of its hepatitis C treatment resulted in lower revenue for Johnson & Johnson (JNJ), but the company beat on the top and bottom line. Still, the stock fell 0.5%, negatively impacting the industrials by 3 points.
Overall earnings for Q2 are forecast to fall by 4.4% year over year, according to FactSet.
Retail sales decreased 0.3% in June from May, according to the Commerce Department. Economists had expected an increase of 0.2%.
Crude oil futures jumped 1.6% to $53.04 a barrel. Gold futures fell 0.2% with a final fix of $1,153.30 an ounce. The yield on the benchmark 10-year Treasury note dropped to 2.40% from 2.43% on Monday.
At Tuesday’s close, the Dow Jones Industrial Average gained 76 points at 18,054, the S&P 500 rose 9 points to 2,109, the Nasdaq gained 33 points at 5,105, and the Russell 2000 was up 8 points at 1,273.
The NYSE’s primary market traded 696 million shares with total volume of 3 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.8-to-1, and on the Nasdaq, advancers led by 1.7-to-1.
While it is always important to view the major indices, sometimes a lesser-followed index, like the NYSE Composite, can offer special insight.
Note that this index, which includes every stock traded on the New York Stock Exchange, has regained its 200-day moving average and moved into midline resistance. That resistance line, now at 11,100, could turn out to be a stiff barrier to a further advance since just before it is the 50-day moving average at 11,031.
Furthermore, a small gap opened with a top at 11,009 on June 29. Gaps like this are often closed on a rally, but rallies also often stop at that point — so it bears watching.
Nevertheless, on Tuesday, MACD flashed a strong buy signal, so the chart is now bullish for the near term.
As for the Russell 2000, an “almost buy” signal, as well as a gap through its 50-day moving average at 1,255, tell us that speculative confidence is high. Just one more line of resistance at 1,275 separates the index from a full attack on its prior high of 1,296, made on June 23.
Conclusion
Volume and breadth lag this advance. Two 15-to-1 down days have not been overcome by up days. In fact, up volume on Monday was ahead of down volume by only 3-to-1 on the NYSE and 4-to-1 on the Nasdaq.
From a more fundamental view, the S&P 500 is trading at 18.3 times estimated 2015 earnings, which is a tad high for an anticipated breakout. But based on 2016 estimated earnings, the P/E multiple is a more reasonable 15.9.
Yet, as Shakespeare said, “There’s many a slip twixt cup and lip,” and 2016’s earnings are, for our purposes, too far in the future to make trading decisions based solely upon them.
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.
