Stocks fell Tuesday for the third consecutive session following comments from Federal Reserve Bank of Atlanta President Dennis Lockhart that interest rates should be raised soon. This jolted the stock market and resulted in a 0.3% drop in the Dow Jones Industrial Average and similar declines in the other major indices.
Although most stocks traded in a narrow range with small losses, Apple Inc. (AAPL) fell more than 4% early in the session and helped drive other technology stocks lower. AAPL regained some of those losses by the close but still finished 3.2% lower at under $115, its lowest close since late January. As the most widely held technology stock, APPL had a major influence on the sector, which fell 0.6%.
Only two sectors closed in the black: consumer discretionary and materials, both up 0.4%. Retail stocks also rose, up 0.7%, influenced by a quarterly earnings and revenue beat from Coach Inc (COH), which jumped 3.2%.
Factory orders for June increased 1.8%, which was in line with expectations.
Crude oil rose 1.3% to $45.74 a barrel, but that had little influence on the energy sector, which fell 0.3%. Telecom services and utilities, both defensive sectors, fell as well, with utilities ending a seven-day winning streak.
Gold ended higher with the December contract fixed at $1,090.70 an ounce, up $1.30. This was attributed to a weaker U.S. dollar and rising oil prices.
At Tuesday’s close, the Dow Jones Industrial Average fell 48 points at 17,551, the S&P 500 was off 5 points at 2,093, the Nasdaq fell 10 points to 5,106, and the Russell 2000 was down 3 points at 1,229.
The NYSE’s primary market traded over 800 million shares with total volume of 3.6 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 1.2-to-1, and on the Nasdaq, decliners were slightly ahead of advancers.
After almost four months in an intermediate decline, the transports have shown some life. The iShares Dow Jones Transport. Avg. (ETF) (IYT) sliced through its 50-day moving average and trendline last week. Even though volume is not at a high level of support, MACD confirmed the breakout.
The next resistance for IYT is the 200-day moving average at $156.58, a tradable distance from Tuesday’s close. But rather than trade the ETF, which doesn’t provide the leverage needed to make a large profit, you might consider a call option on the index, provided you are willing to accept the risk.
Retail is another sector in which traders can go fishing for bargains.
Despite the break from a clearly defined rectangle on the chart of the Consumer Staples Select Sect. SPDR (ETF) (XLP), note that volume is not high enough to provide a solid confirmation of the breakout. And even though MACD confirms the break, it too is not offering strong support.
But the price is well above all of the moving averages, and that is a strong technical reason to consider this as a solid choice.
Like with IYT, traders might slumber waiting for XLP to move. If you can stomach the risk, consider buying a call since the leverage will assist you in making a timely trade.
Conclusion
The current environment, both technically and fundamentally, is not conducive to trading. However, the overall environment for equities is improving. By constantly reviewing our sector charts, we can cherry-pick those that offer the best trading opportunities.
Tomorrow, we will explore the short side for additional trading ideas.
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.
