U.S. equities moved higher again on Wednesday, but closed off of their intraday highs as the major averages contend with overhead technical resistance.
In the end, the Dow Jones Industrial Average gained 0.7% after trading in a 200-point range, the S&P 500 went up 0.8%, the Nasdaq Composite felt a 0.9% boost and the Russell 2000 finished off 1.7% higher. But, aside from gold’s 20 basis point gain, it wasn’t all good: Treasury bonds weakened, the dollar lagged and oil reversed lower.
Overall, it was a quiet session as traders look ahead to the start of the third-quarter earnings season after the close on Thursday when Alcoa (NYSE:AA) reports, as well as the upcoming Federal Reserve policy decision later in the month. Adding to the sense of quiet tension has been the closure of Chinese financial markets for a long holiday break.
Healthcare stocks were the best performer for the day, rising 1.5% thanks to a 2.5% rise in the iShares Biotech (NASDAQ:IBB). Industrials and metals were also notable standouts, while defensive utility and telecom stocks were the laggards.
Twitter (NYSE:TWTR) gained 8% after it was reported that Prince Alwaleed bin Talal and his investment company doubled their ownership of the stock to 5.2% in the past six weeks.
Apple (NASDAQ:AAPL) remains sluggish, losing 0.6% on iPhone sales concerns. GoPro (NASDAQ:GPRO) lost 4.3% on an estimates and price target cut by Morgan Stanley, who found GPRO sales disappointing and also disliked the negative feedback on the HERO4 Session camera and the company’s decision to cut its price.
J C Penney (NYSE:JCP) lost 4.2% after Citigroup analysts initiated the stock with a “sell” rating on competitive pressures and concerns that ill-fated experiment with non-promotional pricing in 2011 will be long lasting. Pandora (NYSE:P) lost 4.6% in response to an announced deal to buy Ticketfly for $450 million.
While stocks have been ripping higher lately, a little context is welcome — the Dow is still down 5.1% for the year to date. And the S&P 500 is now contending with serious overhead resistance from the psychologically important 2,000 level and its 50-day moving average.
I’m looking for a turn lower here with China set to reopen, the IPO market in shambles [Pure Storage (NYSE:PSTG) lost 5.8% in the biggest venture capital backed offering of the year], and energy stocks vulnerable to renewed weakness in crude oil.
With Q3 earnings set to be weak — potentially featuring the first back-to-back earnings decline since 2009 — I’m recommending Edge subscribers remain defensive and on the sidelines.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers.
