The market was stopped in its tracks Friday as investors considered the impact of an interest rate increase in December following a better-than-expected jobs report. Non-farm payrolls for October came in at 271,000 versus expectations of 181,000, and unemployment declined to 5%.
The likelihood that the Federal Reserve will hike rates in December is now at 70%, according to CME Group data.
Economists at Goldman Sachs reviewed transcripts of conference calls from 44 companies and concluded that the impact of the U.S. dollar’s strength was among the topics most often discussed. FactSet reported that companies that have more than 50% of sales overseas have seen earnings fall 10.6% in Q3. The euro fell to $1.0742 on Friday, its lowest close since April.
Shares of bank stocks did well. JPMorgan Chase & Co. (JPM) rose 3% and Goldman Sachs Group Inc (GS) jumped 3.8%. Together they added 61 points to the Dow Jones Industrial Average.
Utilities fell 3.5%, consumer staples were off 1.1%, and energy stocks lost 0.5%.
Crude oil fell 2% to $44.29 a barrel. Gold dropped 1.5% to $1,087.60 an ounce.
The yield on the benchmark 10-year Treasury note rose to 2.34%, up from 2.26% on Thursday.
At Friday’s close, the Dow Jones Industrial Average was up 47 points at 17,910, the S&P 500 fell a fraction to 2,099, the Nasdaq rose 19 points to 5,147, and the Russell 2000 gained 9 points at 1,200.
The NYSE Composite’s primary exchange traded 1 billion shares with total volume of 4.3 billion shares. The Nasdaq crossed 2 billion shares. On the Big Board, decliners outpaced advancers by 1.6-to-1, and on the Nasdaq, advancers led by 1.6-to-1. Block trades on the NYSE rose to 5,898 versus 4,972 on Thursday.
Despite the S&P 500’s struggle against the rising U.S. dollar, November started off strong. But each index is now overbought after broadening its advance to include financial and retail stocks.
Friday’s low at 2,084 came close to the support line at 2,080, which is the top of a zone from 2,050 to 2,080, with the 200-day moving average almost at dead center at 2,063. With three of the past four sessions down, it is vital that buyers emerge to stabilize the index above the 200-day moving average.
Conclusion
Money appears to be moving away from big caps, especially the major global stocks, and into domestic issues, and that is where small and mid caps reside. Thus, it is likely that the Russell 2000 and Nasdaq could continue to attract buyers. But if we commit to a stock, it will be important to invest only in those with almost no global exposure.
Last week, I began a discussion of my proprietary indicator, the Collins-Bollinger-Reversal (CBR). I described Bollinger Bands and said that for the purposes of the CBR I have shortened the moving average to 10 days from the more typical 20 days. This is to make the system more accommodative to trading.
The CBR is triggered when an intraday price exceeds either band (upper or lower) and then executes a reversal. In other words, an outside reversal through a band would trigger the CBR. Since all systems (outside reversals, daily reversals, etc.) depend on volume, I have added a volume factor to the equation.
If time and space permit, I’ll provide a chart example of how the CBR operates as a buy/sell signal on Tuesday.
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.
