On Monday, energy stocks soared, pushing the Dow Jones Industrial Average to within almost 180 points of the 20,000 mark. But declines in the financials offset the energy gains and left the industrials short of the mark despite a gain of 0.2% for the Dow.
The S&P 500 fell 0.1%, and the Nasdaq lost 0.6% due to a decline in the financial sector of 0.9% after five sessions in the black. Nasdaq was also negatively impacted by a fall in drug stocks. The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) fell 0.8%.
Energy shares rose after the OPEC cartel agreed to put a cap on production to try to reduce the global oversupply of crude oil. The S&P’s energy sector rose 0.7%, and WTI (January) jumped 2.6% to $52.83/bbl.
At the close, the Dow Jones Industrial Average gained 40 points at 19,796, the S&P 500 fell 3 to 2,257, the Nasdaq lost 32 points, closing at 5,413, and the Russell 2000 dropped 15 points to 1,373. The NYSE’s primary exchange traded 983,000 shares with total volume of 4 billion shares. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 1.8-to-1, and on the Nasdaq, decliners led by 2.2-to-1. Blocks on the NYSE increased to 6,510 from 5,274 on Friday.
Following four months of shallow pullbacks and rallies that bumped into the resistance line at about 18,600, the Dow industrials broke out on the election of Donald Trump. Now in the fifth week of post-election trading, the Dow, pushed higher by extremely heavy volume, has broken from a narrow bull channel with an exponential thrust higher.
Conclusion: Regardless of the reason, the technical condition of the market is very positive, if somewhat overbought. However, overbought as it is, it is led by the blue chips, a strong positive condition. I am aware that some of our readers like to see the “soldiers lead and the generals lag.” However, it has been my experience that when the Dow industrials lead with very high volume, the secondary issues follow.
A broad market rally is occurring. Don’t be left behind, but don’t chase stocks with very high price-to-earnings multiples either.
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.
