Technology and financial stocks led Wednesday following dovish comments from Federal Reserve Chair Janet Yellen on Tuesday, but the gains appear to be slowing. The Dow Jones Industrial Average rose 0.5% while the S&P 500 advanced 0.4%.
Apple Inc. (AAPL) jumped 1.8%, making it the Dow’s second best performer and helping to boost the technology sector 0.6%. Also contributing to the sector’s gains was salesforce.com, inc. (CRM). The stock leapt 2.8% after announcing a blank purchase agreement with various government departments that totaled $603 million.
It was a “risk on” day with defensive sectors like utilities, health care and telecom services lagging.
WTI crude oil gave up some early gains but still closed 0.1% higher at $38.32 a barrel. Gold lost 0.7% at $1,228.60 an ounce, and the U.S. dollar fell 0.4% against a basket of currencies.
At Wednesday’s close, the Dow Jones Industrial Average rose 84 points to 17,717, the S&P 500 gained 9 points at 2,064, the Nasdaq rose 23 points to 4,869 and the Russell 2000 was up 1 point at 1,110.
The NYSE Composite’s primary exchange traded 824 million shares with total volume of 3.6 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.7-to-1, and on the Nasdaq, advancers led by 1.6-to-1. Block trades on the NYSE fell to 5,435 from 5,734 on Tuesday.
The Dow Jones Industrial Average closed Wednesday slightly above the bearish resistance line drawn from the all-time closing high made in mid-May and connecting various highs in 2015. But the break through its 200-day moving average in March was far more impressive, accompanied by higher volume and breadth of 4.9-to-1. A late round of profit-taking robbed the index of a triple-digit gain.
Conclusion
While the generals (big caps) are leading slightly, the soldiers (mid and small caps) lag with lower-than-average volume. This is generally considered a sign of weakness. However, this pattern has prevailed, with some minor exceptions, since the double-bottom of January/February.
As our readers know, I have been cautious throughout the advance, not willing to be an aggressive buyer, and I remain so. As I’ve said before, it is not only important what stocks do but how they do it. I’ve encouraged traders to trade both sides of the market and cautioned long-term investors to only buy stocks with excellent balance sheets and a history of solid earnings and dividends.
At the current high levels, I don’t believe it is wise to chase stocks assuming they will continue to make new highs since companies now must depend on earnings and revenues for gains rather than the Fed.
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.
