Stocks continued their advance on Thursday, but traders were cautious prior to today’s jobs report. The S&P 500 rose 0.4%, the Dow Jones Industrial Average gained 0.3% and the Nasdaq added 0.1%. The day’s leaders were small caps and transports with the Russell 2000 up 1% and the Dow Jones Transportation Average advancing 1.1%.
On a sector front, energy outperformed, up 1.5%, followed by industrials and financials. The gains in energy stocks were made despite WTI oil prices falling 0.3% to $34.57 a barrel.
The industrial sector’s advance was largely due to gains in Deere & Company (DE), Caterpillar Inc. (CAT) and Joy Global Inc. (JOY), the latter jumping more than 20% on an upbeat forecast despite a larger-than-expected loss in its fiscal first quarter.
While jobless claims rose last week, The Wall Street Journal reported the number was still “low enough to suggest employers continue to steadily expand.”
Gold advanced 1.3% to $1,257.40 an ounce. The euro rose on better-than-expected retail sales in the euro zone. The common currency was up 0.8% against the U.S. dollar at $1.0957.
The yield on the 10-year Treasury note fell to 1.83%, down from 1.84% on Wednesday.
At Thursday’s close, the Dow Jones Industrial Average rose 45 points to 16,944, the S&P 500 gained 7 points at 1,993, the Nasdaq was up 4 points at 4,707 and the Russell 2000 added 10 points at 1,076.
The NYSE’s primary exchange traded 934 million shares with total volume of 5 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 3.1-to-1, and on the Nasdaq, advancers led by 1.6-to-1. Block trades on the NYSE declined to 7,165 from 7,215 on Wednesday.
On Thursday, the Dow Jones Transportation Average jumped into the band of resistance that begins at 7,455. This advance followed Tuesday and Wednesday’s penetration of that line. But this was supported by below-average volume and an overbought MACD indicator.
The full overhead picture is not shown on this chart, but it reaches back to November 2014 at 9,310.
Conclusion
Apparently investors are expecting a strong February employment report today since the Dow Jones Transportation Average is supposed to be predictive of future economic conditions.
But despite the run-up in the major indices, volume and internal indicators are telling us to be cautious. I’d rather buy pullbacks than chase stocks with high P/Es that resulted from recent moves into major resistance zones.
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.
