Stocks traded flat Thursday as uncertainty regarding stimulus measures from the ECB dominated. Negative interest rates have, so far, resulted in little in the way of economic growth in Europe.
A drop in the price of crude oil, down 1.2% to $37.84 a barrel, led to losses in some energy stocks. Banks, which have financed much of the activities of energy companies, also declined, down 0.1%. JPMorgan Chase & Co. (JPM) fell 0.9%, helping weigh down the Dow Jones Industrial Average.
While the euro fell after the ECB’s announcement, it closed up 1.7% against the U.S. dollar at $1.1182. The gain was made despite the ECB’s cut in interest rates, which pushes the deposit rate deeper into negative territory.
U.S. initial jobless claims fell by 18,000 to 259,000 for the week ending March 5, according to the Labor Department. This was the lowest level since October.
Gold, which is a traditional inflation hedge, rose 1.2% to $1,272.80 an ounce. But this may have been the result of investors parking proceeds from stock sales in the yellow metal as protection against a sell-off in equities. Gold futures are up about 20% so far in 2016.
At Thursday’s close, the Dow Jones Industrial Average fell 5 points to 16,995, the S&P 500 was flat at 1,990, the Nasdaq lost 12 points at 4,662 and the Russell 2000 was down 9 points at 1,064.
The NYSE Composite’s primary exchange traded 1 billion shares with total volume of 4.4 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers 1.3-to-1, and on the Nasdaq, decliners led by 1.8-to-1. Block trades on the NYSE increased to 6,446 from 5,576 on Wednesday.
I last reviewed SPDR Gold Trust (ETF) (GLD) in the Jan. 5 Trade of the Day, advising readers buy it as a short-term hedge against a possible breakdown in equities and a long-term hedge against inflation. I set an initial trading target at $110.
GLD exceeded that target, forming a saucer bottom. A break from the saucer pattern took shares to a high above $122 on March 4.
My proprietary internal indicator, the Collins-Bollinger Reversal (CBR), flashed a special situation that day — a strong buy signal at about $120.50. But in order to complete the signal, GLD must close above its high at $122.37.
Conclusion
For gold to be a buy at this level, investors must be feeling very uneasy about the global economic outlook. ECB President Mario Draghi appears to have run out of ways to stimulate the European economy.
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.
