On Wednesday, declining crude oil prices, the terror attack in Brussels and hawkish commentary from St. Louis Federal Reserve Bank President James Bullard sent stocks into a broad decline.
Bullard saying an interest rate increase in April remained a possibility was itself enough to create uncertainty. It led some commentators to say that the central bank has too many spokespersons in contrast to the Greenspan Fed. And, along with some subpar earnings, it was blamed for a 0.8% decline in the financial sector.
Energy stocks fell 2.2% as WTI oil declined 4% to $39.79 a barrel. The main culprit was government data that showed a large increase in crude stockpiles.
Gold lost 2% at $1,223.70 an ounce. The euro fell 0.3% against the U.S. dollar to $1.1182. And the yield on the 10-year Treasury note fell to 1.88% from 1.94% on Tuesday, as bond prices rose.
At Wednesday’s close, the Dow Jones Industrial Average fell 80 points to 17,503, the S&P 500 lost 13 points at 2,037, the Nasdaq dropped 53 points to 4,769 and the Russell 2000 was off 22 points at 1,076.
The NYSE Composite’s primary exchange traded less than 840 million shares with total volume of 3.6 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, decliners outpaced advancers by 2.8-to-1, and on the Nasdaq, decliners led by 3.7- to-1.
The straight run-up from the February low may have come to a close this week. After a surprising rally that pierced three resistance lines and as many moving averages on the Dow Jones Industrial Average, it appears the gas tank is low.
First support for a pullback is at the support line at 17,175 and the 200-day moving average, now at 17,132.
The advance from the February low looked very similar to the run from the September low but carried more positive volume and had almost no consolidations.
The run in the S&P 500 looks much like the Dow’s advance. It too appears to be turning down from its bearish resistance line. MACD has a slight downward bias but, like the low volume, that could be due to the upcoming long weekend.
Conclusion
Compared to Tuesday’s charts of the mid and small caps, today’s charts are powerhouses. Those who depend on the small and mid caps to lead should not be pleased with such a stark contrast between large and small. I, however, have never concluded that one over the other is significant and feel more comfortable seeing the institutions go after the big boys.
This week may be just a hesitation in the trend prior to the long weekend, which will pick up again next week. In spite of terrorist activity in Europe, a weak economy in China, the U.S. election and dozens of other uncertainties, the stock market has not wavered in its near-term trend.
However, from here, the Dow Jones Industrial Average and S&P 500 will have to perform or pull back to their 200-day moving averages. And when the major moving averages come under attack, anything can happen.
I wish you a happy Easter.
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.
