EDITOR’S NOTE: Sam Collins will return on Feb. 21.
The bulls may have been firmly in charge of the market on Friday, inspired by a strong employment report for January. As has been the case so many times since December though, the rally lacked follow-through. The S&P 500’s close of 2,292.56 yesterday was 4.86 points down from, or 0.21% below, Friday’s last trade.
And that was more or less the story for the Nasdaq Composite and the Dow Jones Industrial Average. The Nasdaq fell 3.21 points to end the session at 5,663.55, while the Dow slumped 19.04 points, or 0.09%., to close at 20,052.42. None of the major indices made their way into new-high territory, though all of them remain within striking distance of record-high levels.
Energy stocks were the day’s big loser, giving up 0.9% even though crude oil eked out a gain of 0.36% on Monday, to close at $53.20 per barrel; investors were more concerned about the dollar’s strength and what it may mean for oil stocks. Schlumberger Limited (NYSE:SLB) did the most damage, with a 1% stumble.
At the other end of the spectrum, technology stocks finished the session with a tiny gain of 0.1%. Apple Inc. (NASDAQ:AAPL) carried the weight there, with a 1% gain of its own.
The weakness was broad too. For the NYSE, 59% of its listings lost ground, and 37% advanced The Nasdaq’s breadth was similarly bearish, with 60% of its issues losing ground versus 35% of them rising on Monday. Even so, depth — selling volume — was modest. The NYSE’s total trade was only 3.11 billion shares, down a bit from Friday’s action. The NYSE’s and the Nasdaq’s bullish/bearish volume ratios essentially mirrored both indices’ advancer/decliner ratios.
Still, a handful of names overcame marketwide weakness. Hasbro, Inc. (NASDAQ:HAS) was one them. Shares of the toymaker jumped 14% following the company’s fourth quarter earnings report that topped expectations.
The overall market remains in its tepidly bullish mode, framed as much by horizontal boundaries as it is by rising lows and rising highs. For the S&P 500, that horizontal floor is at 2253. More recently though, the index has found support at a modestly meaningful rising support level, and it remains above the 20-day moving average line.
To start the next leg of bullishness though, the S&P 500 will need to clear the 2,301 ceiling where it peaked two weeks ago.
The Nasdaq Composite is also knocking on the door of a breakout. Monday’s high of 5,668 is right below the high from two weeks ago.
While momentum is bullish, there’s no denying stocks are technically overextended and struggling to tack on more gains with any amount of consistency. The S&P 500 is now 6% above the 200-day moving average line after having rallied 10% since the early November low. That’s a tough act to follow, particularly this time of year.
February is generally a tough month, and even tougher when it’s the first February of a four-year Presidential term. The S&P 500 essentially breaks even this month (and then only because it finishes strong following a mid-month lull), and when it’s the year after an election, February averages a 1.6% loss.
Still, until the indices actually start to break under key technical levels, the undertow has to be considered bullish even if valuations are reaching uncomfortable levels again. The S&P 500 is now valued at a trailing P/E of 21.2. That doesn’t leave much room for gains, which is why they’ve been so slow-going of late.
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.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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