Tuesday was another day of meandering trade, with the Dow Jones Industrial Average and S&P 500 closing unchanged, despite a new intraday high in the latter. Most of the activity was centered in smaller-cap stocks, and the Nasdaq was driven to a new record intraday and closing high.
Two factors kept a lid on the advance, though. First, the Labor Department’s said productivity of American workers fell for the third consecutive quarter, down a seasonally adjusted annual rate of 0.5% in Q2. Second, after hitting a two-week high on Monday, oil lost 0.6% at $42.77 a barrel, putting it 17% below its June high.
Defensive sectors held the line Tuesday. Health care rose 0.2% as Bristol-Myers Squibb Co (NYSE:BMY) stemmed its massive losses and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) soared more than 25% following its earnings report.
Large-cap technology stocks like Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOGL) and Microchip Technology Inc. (NASDAQ:MCHP), a recent Trade of the Day pick, added to gains in the Nasdaq.
Walt Disney Co (NYSE:DIS) rallied in after-hours trading on a revenue and earnings beat.
At Tuesday’s close, the Dow Jones Industrial Average rose 4 points to 18,533, the S&P 500 gained 1 point at 2,182, the Nasdaq jumped 12 points to 5,225, and the Russell 2000 was up a point at 1,232.
The NYSE Composite’s primary exchange traded 749 million shares with total volume of 3.3 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, advancers outpaced decliners by 1.2-to-1, and on the Nasdaq, advancers led by 1.3-to-1. Block trades on the NYSE were virtually unchanged at 4,735 versus 4,713 on Monday.
For traders who love small caps as an indicator, Tuesday’s action couldn’t have been better. The index closed at a new record high and also hit a new intraday high, exceeding the all-time high set on July 20, 2015, at 5,231.94 with a new high of 5,238.54.
This confirms that a bull market for the Nasdaq is still in force with first support at the 20-day moving average at 5,119.89, followed by the Aug. 2 low at about 5,110.
Conclusion
A secular bull market is still in force. Supported by normal group rotation and led by the small and mid caps, the high in the larger-cap stocks is still ahead.
As I noted in the Aug. 3 Daily Market Outlook, “Pullbacks should be treated as buying opportunities, especially for investors.” Traders, however, must be alert to sectors that have been ignored and, therefore, could bounce quickly. One such group is the under-appreciated financial sector (see my Trade of the Day).
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.
