Stocks rebounded Friday, but the Dow Jones Industrial Average and S&P 500 still posted the second straight week of losses.
The market’s weakness is largely being blamed on lackluster earnings reports. FactSet said that with more than 85% of the S&P 500 companies reporting so far, we are on track to see a 7.1% year-over-year decline. But some sectors are showing earnings gains, led by consumer discretionary (+19.1%) and telecom services (+16.6%).
Speaking of earnings, following a strong report, Activision Blizzard, Inc. (ATVI) soared 8.5% on Friday, making it the biggest advancer on the S&P 500.
Friday’s jobs report, which was expected to show an increase of 205,000 jobs in April, only saw 160,000 jobs created. This was the slowest growth since September.
Crude oil prices increased 0.8% to $44.66 a barrel on Friday, and gold added 1.7% at $1,292.90 an ounce. The U.S. dollar increased 0.2% against a basket of 16 currencies, and the yield on the 10-year Treasury note rose to 1.78% from 1.76% on Thursday.
At Friday’s close, the Dow Jones Industrial Average rose 80 points to 17,741, the S&P 500 gained 7 points at 2,057, the Nasdaq jumped 19 points to 4,736, and the Russell 2000 was up 7 points at 1,115.
The NYSE Composite’s primary exchange traded 970 million shares with total volume of 3.8 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 1.9-to-1, and on the Nasdaq, advancers led by 1.2-to-1. Block trades on the NYSE declined to 5,712 from 5,854 on Thursday and from 6,996 one week ago.
For the week, the Dow lost 0.2%, the S&P 500 dropped 0.4%, the Nasdaq declined 0.8%, and the Russell 2000 fell 1.4%.
Friday’s late-day buying resulted in an intraday upside reversal in the Dow Jones Industrial Average and confirmed the significance of the 50-day moving average at 17,544.60, as well as the bearish resistance, now bullish support line, at about the same level.
However, volume was lower than average and the MACD indicator is still negative. A break under Friday’s low at 17,580 could result in significant decline.
The S&P 500 experienced a similar bullish reversal on Friday with late buying that drove the close within about half a point of the day’s high. However, if the S&P 500 is unable to continue its advance, the supports lines at 2,052 and 2,035 (a potential neckline of a head-and-shoulders reversal) could have a negative impact.
Conclusion
Friday’s late-day buying lacked volume but was broad-based enough to potentially drive stocks higher for several days. In light of what could be a bearish top forming, though, it is wise to use any advance as an opportunity to engage in bearish strategies.
The Dow’s 50-day moving average provides a visually obvious support line, like the possible neckline at 2,035 of the S&P 500. If the neckline is broken, it would likely result in a quick fall to the next support, the 200-day moving average at 2,012. If support on the Dow is broken, it could easily drop to 17,200 to 17,116.
The defense is still on the field.
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.
