On Tuesday, the Dow Jones Industrial Average closed to within 90 points of a milestone — the psychologically important 20,000 level.
However, while the DJIA gained 0.6%, the S&P 500 rose 0.7% and the technology-heavy Nasdaq gained a full 1%, the Russell 2000 (small-caps) closed basically unchanged. This could indicate that the small-caps may be running out of buyers.
The recent gains have been pushed along by better growth and earnings. Thus, there is an expectation of enough evidence of an improved economy to allow the Federal Reserve to raise short-term interest rates by 0.25% today. The yield on the benchmark 10-year Treasury note was at 2.5% on Tuesday, a 17-month high.
Crude oil closed higher as traders appeared confident that OPEC and other producers will stand by an agreement to cut production. The WTI January contract rose 0.3% to $52.98 per barrel, the fourth day of gains for the January futures.
At the close, the Dow Jones Industrial Average gained 115 points at 19,911, the S&P 500 rose 15 points at 2,272, the Nasdaq closed at 5,464, gaining 51 points, and the Russell 2000 closed at 1,374, unchanged. The NYSE primary exchange traded 913 million shares with total volume of 3.8 billion shares. The Nasdaq crossed 2.1 billion shares. On the Big Board, advancers outpaced decliners by 1.5-to-1, and on the Nasdaq, advancers led by 1.3-to-1. Blocks on the NYSE fell to 6,213 from 6,510 on Monday.
Monday’s chart of the DJIA showed an exponential breakout just as today’s chart of the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) does. But the Dow’s chart contains one valuable feature that is lacking in the IWM — very high volume. The Dow’s high volume continued yesterday as the index marched to the 20,000 line.
Conclusion: It appears that institutional block buyers, who enter the market in the last minutes of trading, are convinced that the blue-chip index is where they should close out the year.
But can the overall market be sustained just by the Dow? Probably it can — at least until Dec. 30. January, on the other hand, could turn out to be as tough on stock holders as last January. Meanwhile, enjoy the ride for the next few weeks. Then plan to raise some cash for the possible bargains offered by January’s sales.
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.
