On Thursday, the Dow Jones industrials established a new record high. The high resulted from a store of sidelined cash and short covering, but all in anticipation of tax cuts and fiscal spending. The DJIA closed 1.17% higher, but the S&P 500 gained just 0.2% and the Nasdaq fell 0.8%. The Russell 2000 held its gains closing 1.58% higher.
The gains were largely due to expectations that the new administration would scale back onerous regulations on the banking industry and increase spending in infrastructure, while boosting military spending. The Wall Street Journal pointed out that “roughly half of the Dow industrials’ point gain . . .” was due to JPMorgan Chase, Goldman Sachs Group, and 3M Company’s advances.
The strongest sectors of the S&P 500 were financials (+3.7%), industrials (+2.1%) and health care (+1.2%). Heavy buying of financials was due in part to a goal by Republicans to dismantle the burdensome Dodd-Frank law. That law, they claim, has put a brake on economic expansion. Some wish to replace it with older legislation (Glass-Steagall) or newer forms of bank regulations.
The Nasdaq fell, despite a rally in biotechnology stocks (+1.6%), due to profit taking and concern over tighter limits on trade and stricter immigration rules.
At the close, the Dow Jones Industrial Average gained 218 points at 18,808; the S&P 500 closed at 2,167, up 4 points; the Nasdaq gave up 42 at 5,209; and the Russell 2000 gained 19 points to close at 1,252. The NYSE’s primary exchange traded almost 1.5 billion shares. The Nasdaq crossed almost 3 billion shares. On the Big Board, decliners outpaced advancers by 1.2-to-1, and on the Nasdaq, advancers led by 1.6-to-1. Blocks on the NYSE declined to 7,185 vs. 7,339 on Wednesday.
Yesterday, while big gains continued in many sectors, the exchange-traded funds iShares S&P NA Tec. Semi. Idx. Fd.(ETF) (NASDAQ:SOXX) ETF, which represents the technology sector, or more specifically the semiconductors, broke sharply lower. Not only did it flash one of my CBR Sell signals but it has also executed an outside reversal and closed below its 50-day moving average. Selling volume has been very high for two consecutive days, and MACD issued a sell.
Conclusion: It is true that through Oct. 31, the SOXX was up around 25% and probably should experience some profit-taking. And the PowerShares QQQ Trust (NASDAQ:QQQ), which represent big-cap technology stocks, fell as well. But if there is more to the reversal of technology stocks than mere profit-taking, then perhaps we should delay buying and further evaluate the reaction of the stock market to the election.
Let’s face it — any real economic impact of a Trump administration is many months away.
Caveat Emptor!
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.
