On Wednesday, a broad but mild pullback in the major indices resulted from a decline in crude oil prices. The benchmark crude (WTI) price fell 5% to its lowest level since November, following the government’s report of a large buildup in fuel stockpiles.
The Dow Jones Industrial Average fell 0.3%, the S&P 500 lost 0.2%, the Nasdaq rose less than 0.1% and the Russell 2000 lost 0.6%.
Energy shares on the Dow Jones took the brunt of the selling with Chevron Corporation (NYSE:CVX) down 2% and Exxon Mobil Corporation (NYSE:XOM) off 1.8%. Other energy stocks were hit harder: Marathon Oil Corporation (NYSE:MRO) fell 8.7%, and Murphy Oil Corporation (NYSE:MUR) fell 6.7%.
FactSet reported that corporate earnings improved for S&P 500 companies after five consecutive quarters of lower earnings. And the ADP National Employment Report showed strength in the labor market. These factors are closely watched by members of the Federal Reserve and point to an increase in short-term rates next Wednesday.
At the close the Dow Jones Industrial Average was off 69 points, closing at 20,856, the S&P 500 fell 5 points to 2,363, the Nasdaq gained 4 points at 5,838, and the Russell 2000 closed at 1,366 for a loss of 9 points. The NYSE’s primary exchange traded 889 million shares with total volume of 3.8 billion shares, and the Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 2.7-to-1, and on the Nasdaq, decliners led by 1.5- to-1. Blocks on the NYSE increased to 6,953 from 6,298 on Tuesday.
The 500, pushed lower by declining energy stocks, fell through the support line at 2,367 and into a zone with 2,351 at the new support level. The fall was accompanied by just average volume, a fact that has pushed the 500 lower for three straight days but has no negative long-term significance. A small continuation gap was closed and MACD issued a minor sell signal.
Conclusion: The breakout on March 1 has been erased by three straight down days on both the S&P 500 and the Dow Jones. Both closed an open gap that led to a new high. This is characteristic of a normal short-term adjustment. It makes perfect sense for traders to nail down profits prior to central banks of both Europe and the U.S. nearing a decision on interest rates.
Keep your powder dry as you accumulate lists of stocks that you would like to own at slightly lower prices. The Federal Reserve may very well grant your wish for higher interest rates and lower stock prices.
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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