Lower oil prices and weakness in financials and technology had a negative impact on the broader market Monday. Energy stocks led the decline, down 2.5%, as the price of crude fell 1.4% to $43.98 barrel. This Wednesday’s FOMC meeting announcement also kept buyers at bay.
Building stocks dropped after new home sales for September missed expectations by a wide margin. Sales of new U.S. single-family homes declined 11.5% to the lowest level in nearly a year.
Biotechnology stocks rebounded with iShares NASDAQ Biotechnology Index (ETF) (IBB) up 0.4%. The health sector as a whole also rose 0.4%. But Valeant Pharmaceuticals Intl Inc (VRX) lost 5.3% as management struggled to overcome the cloud of accusations of illegal activity with specialty pharmacies.
Xerox Corp (XRX) fell 3.1% after reporting a quarterly loss — the first since 2010. Its CEO said there would be a “comprehensive review of structural options for the company’s portfolio,” but the sale of the company is not being considered.
Gold gained 0.3%, rising to $1,167 an ounce. The euro advanced 0.4% against the U.S. dollar at $1.1059.
At Monday’s close, the Dow Jones Industrial Average fell 24 points to 17,623, the S&P 500 lost 4 points at 2,071, the Nasdaq gained 3 points at 5,035, and the Russell 2000 was down 7 points at 1,160.
The NYSE Composite’s primary exchange traded 838 million shares with total volume of 3.3 billion. The Nasdaq crossed 1.7 billion shares. On both the Big Board and Nasdaq, decliners outpaced advancers by 1.6-to-1.
Block trades — those exceeding 10,000 shares of stock or $200,000 in bonds — have increased steadily. For instance, on relatively low overall volume, there were 4,541 block trades on the NYSE versus 5,153 on Friday and 4,637 on Oct. 19. I will continue to monitor this phenomenon.
Both SPDR S&P MidCap 400 ETF (MDY) and iShares Russell 2000 Index (ETF) (IWM) (not shown) are slow to attack the immediate overhead.
MDY is stalled at the first line of resistance, the closing highs of September at $262. This resistance is weak in that a mere 8 points above it is the major resistance of the 200-day moving average at $270. Volume is flat and MACD is falling.
Conclusion
The former leaders of the bull market have stalled while block trading in the major indices has increased. This tells us that portfolio managers are “window dressing” before year end. That and short-covering have, I believe, been moving the stock market since Oct. 1, though that is difficult to prove.
How long can the move up persist? The answer is not precise since there is no practical way to measure the amount of money at the disposal of these managers. We do know, however, that the prime movers, the central bankers, have almost unlimited funds. And the ECB said on Friday that another round of QE is possible in Europe.
On Wednesday, we should also hear more about the intentions of our own central bank. But my guess is that the ECB will have its way and the Fed will hold off on a rate hike for several more months. However, if the Fed raises rates, watch out below.
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.
