On Friday, a last-minute rally helped the Dow Jones Industrial Average salvage its 11th-straight record close (see minute bar chart of the Dow Jones, below). After a gap-down opening that took 76 points from the blue-chip index, a 31-minute rally closed the open gap. The index then faded and spent much of the remainder of the session within a 35-point range with a small loss until the last 30 minutes of trading when buyers emerged to sustain another gain.
Despite the Dow’s bullish close, it was the utility companies that outshined all other sectors’ performance: Investors jumped on the utility sector providing the best performance for the high-dividend sector since July. For the week, the utility sector in the S&P 500 rose 4%, and FactSet reports that the average dividend yield in the group is 3.5%.
The Dow Jones’ advance, fueled by the expectation of lower regulatory requirements and a reduction in taxes, has resulted in gains for owners of stocks. Since Election Day the Dow Jones has risen 5.4%, the S&P 500 gained 5.7%, and the Nasdaq is up an astounding 8.6%.
The worst performers in the S&P 500 on Friday were the energy stocks, due to a fall of 0.8% in crude oil (April) to $53.99 per barrel. The stocks fell 0.9%.
At the close the Dow Jones Industrial Average gained 11 points to close at 20,822, the S&P 500 gained 4 at 2,367, the Nasdaq rose 10 points to 5,845, and the Russell 2000 closed at 1,395 for a gain of 4 points. The NYSE’s primary exchange traded 934 million shares with total volume of 3.8 billion shares, and the Nasdaq crossed 1.7 billion shares. On the Big Board, advancers slightly exceeded decliners, and on the Nasdaq, decliners outpaced advancers by 1.2-to-1. Blocks on the NYSE fell to 6,760, down from 6,940 on Thursday.
On Friday, the Nasdaq penetrated its first fragile support at 5,838 during the opening round of selling. However, like the Dow Jones, it reversed in the final minutes, staging a minor reversal. Today we will see if that reversal holds. If not, the next support is again at 5,838 and then the 20-day moving average at 5,737 and the bullish support line of the bull channel, just under 5,700.
Conclusion: Most of the classic technicians were of the opinion that volume is the most important measure of the strength of a market’s move. If that theory is correct, we may be due for a significant correction since the average day’s volume has been relatively low: Daily average of 6.7 billion shares per day this year compared to 9 billion shares per day last year, as reported by the WSJ Market Data Group, is not a healthy sign.
As noted last week: it appears timely for traders to cash in some of their gains and protect their overall gains in what has been a very profitable start to the year.
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.
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