The major indices scored fractional gains, mainly thanks to strength in the financials. But profit-taking and general malaise seemed to hold the market back.
Both Bank of America Corp (BAC) and Wells Fargo & Co (WFC) reported a decline in quarterly profits, but earnings came in above analysts’ reduced estimates. BAC jumped 2.5% on the news, but WFC was down 0.5% for the day.
The Consumer Price Index (CPI) rose in March for the first time in four months, but fell short of estimates. On a brighter note, the Labor Department said the number of workers applying for unemployment benefits fell last week to the lowest level since 1973.
The U.S. dollar rose on the mixed economic reports, and its strength against the yen helped push the Nikkei 225 up 3.2%. China’s central bank lowered its guiding rate for the yuan against the dollar by 1%, following a record 1.9% devaluation the previous day.
Oil fell 0.6% to $41.50 a barrel, and gold lost 1.7% at $1,225 an ounce.
At Thursday’s close, the Dow Jones Industrial Average gained 18 points at 17,926, the S&P 500 was flat at 2,083, the Nasdaq fell 2 points to 4,946 and the Russell 2000 lost a point at 1,129.
The NYSE Composite’s primary exchange traded 905 million shares with total volume of 3.7 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, decliners outpaced advancers by 1.3-to-1, and on the Nasdaq, decliners led by a fraction. Block trades on the NYSE fell to 6,698 from 6,921 on Wednesday.
Almost every index performed like SPDR S&P MidCap 400 ETF (MDY), failing to move ahead on very low volume. The MACD indicator would have triggered a buy signal, but puny volume prevented it. A momentum line (not shown) actually fell, indicating a lack of fuel to keep the trend intact.
Conclusion
Despite Thursday’s lack of follow-through, the intermediate trend is still up. However, the pronounced lack of momentum indicated the pessimists — or perhaps the fearful — clearly outnumbered the optimists.
To me, almost everything except for the biotech group appears overbought. And the energy sector is the most expensive, with Bespoke noting, “About half of the stocks in the sector are now more than 50% above their 52-week lows, and four are more than 100% above their lows.”
Jeff Saut of Raymond James pointed out that the McClellan Report says, “Bearish for short and intermediate trading styles, bullish long term.”
I agree in that I favor the “upside,” but not now. Buy on pullbacks, not high-P/E advances.
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.
