Monday logged the third consecutive day of gains for the Dow Jones Industrial Average and the S&P 500.
The Dow Jones gained 0.4%, the S&P 500 rose 0.5% and the Nasdaq gained 0.8%. The Russell 2000 rose 0.7%. Ten of the eleven sectors of the S&P 500 gained ground and have recovered all but seven points of last Wednesday’s 44-point loss.
The rally was attributed to a rise in technology and industrial shares, with large-cap names leading mid- and small-caps. Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Qualcomm, Inc. (NASDAQ:QCOM) led the list of big-cap advancers. Analysts are of the opinion that much of the recovery from last Wednesday’s decline is due to news that over $300 billion in new business will result from the president’s efforts with Saudi Arabia, which focus on defense industry orders.
FactSet reported that 75% of the companies that have so far reported Q1 earnings have beat EPS estimates, and over 95% have reported.
Crude oil (WTI) rose 0.8% to $50.72 per barrel, and one analyst, quoted by The Wall Street Journal, said that “$40-$60/bbl. is a reasonably good sweet spot markets are comfortable with.”
At the close, the Dow Jones Industrial Average gained 90 points at 20,895; the S&P 500 added 12 points to close at 2,394; the Nasdaq jumped 50 points to 6,134; and the Russell 2000 closed at 1,377 for a gain of 10. The NYSE’s primary exchange traded 792 million shares with total volume of 3.2 billion shares. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by over 2-to-1, and on the Nasdaq, advancers led by 1.9-to-1. Blocks on the NYSE fell to 7,028 from 7,598 on Friday.
The Dow Jones Industrial Average, despite the benefit of increased deals to some members, is not so strong as the S&P 500 or Nasdaq. The major resistance line is at about 21,000. Volume is declining following Thursday’s upside reversal, and although it has rallied through the 50-day moving average, it appears to be stalling at the minor 20-day moving average at 20,918. Yesterday’s 54-point trading range on declining volume is troubling.
Conclusion: A stall at the 20-day moving average is negative. Even though the Dow Jones and other indices have regained a significant part of last Wednesday’s decline, the Dow Jones, with its big-cap membership, is going to have to attract more if it is to break the triple top at 21,034. A failure in momentum now could trap the bulls in a trading range of 20,100 to 21,400 for the rest of the summer.
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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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