Sellers jumped on financial and energy stocks Thursday, breaking the first three-day rally of the year. In addition to weakness in these sectors, some earnings disappointments added to investors’ angst. Selling was especially heavy on the close, driving stocks to their lowest levels of the day at the final bell.
The Wall Street Journal reported that some analysts said that even after the recent gains investors are still concerned that global economic problems could reach our shores. As Bill Nichols, head of U.S. equities at Cantor Fitzgerald, put it, “All the same worries that were there two weeks ago are still in place.”
Dovish remarks by St. Louis Federal Reserve President and FOMC voting member James Bullard, who questioned the wisdom of further rate hikes, put pressure on the financials, which fell 0.6%. Continued talk by presidential candidates of a breakup of the big banks also contributed to their decline.
Dow Jones Industrial Average member Wal-Mart Stores, Inc. (WMT) fell 3% after lower guidance offset better-than-expected quarterly earnings.
International Business Machines Corp. (IBM) advanced more than 5% after it announced the purchase of Truven Health Analytics for $2.6 billion and was upgraded by Morgan Stanley to “Overweight” from “Equal Weight.” Also in the technology sector, NVIDIA Corporation (NVDA) jumped 8.6% after reporting better-than-expected quarterly revenues and earnings, as well as guidance for the year.
A government report showing oil stockpiles hit an 86-year high resulted in a fall from crude’s highs for the day. Even so, WTI oil finished up 0.4% at $30.77 a barrel.
Gold advanced 1.2% to $1,226.10 an ounce, and the euro fell 0.3% against the U.S. dollar at $1.11.
At Thursday’s close, the Dow Jones Industrial Average was down 40 points at 16,413, the S&P 500 fell 9 points to 1,918, the Nasdaq lost 47 points at 4,488 and the Russell 2000 declined 6 points to 1,005.
The NYSE Composite’s primary exchange traded 1.1 billion shares with total volume of 4.4 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, there were slightly more advancers than decliners, and on the Nasdaq, decliners led by 1.5-to-1. Block trades on the NYSE fell to 6,163, down from Wednesday’s total of 7,034.
The sole three-day rally of the year was halted just as it approached its first test. The massive “W” appears to lack the volume necessary to punch into the overhead that begins at the descending 50-day moving average, currently at 1,957. However, Thursday’s lighter downside volume is a positive for the bulls, as is a “W” bottom… usually. But there has been little in the way of “usual” this year, and most of the technical action has been bearish.
Conclusion
Even if the bulls are able to punch through the triple-top of the “W,” they are faced with a host of technical difficulties, including three major resistance lines and two major moving averages.
These very visible barriers, along with high volatility, have helped traders score quick gains. But investors have been frustrated with the back-and-forth action that looks to me like it will continue for an indefinite period.
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.
