Despite a late sell-off, stocks managed to score yesterday to end the best month of gains in more than six years. Financial stocks led the advance and at one point were ahead by more than 8%. The sell-off took some of that away yet they still closed with a 6.7% gain.
There was little in the way of corporate news but on the economic front the March Consumer Confidence Index came in at 26, which was worse than the expected reading of 28. The S&P/Case-Shiller 20-city Composite Home Price Index for January declined 19% year-over-year, and that was worse than the 18.6% drop that was expected.
At the close, the Dow Jones Industrial Average (DJI) had gained 87 points closing at 7,609, the S&P 500 (SPX) rose 10 points to 798, and the Nasdaq (NASD) was up 27 points to 1,529.
On the NYSE, more than 1.6 billion shares traded with advancers ahead by just over 3-to-1. The Nasdaq traded 771 million shares with advancers there ahead by 9-to-4.
The May crude oil contract ended the day higher by $1.05, closing at $49.66 a barrel, and the Amex Energy SPDR fell 36 cents to $42.46.
Gold for April delivery rose $7.30 to $922.60 an ounce as the U.S. dollar weakened and stocks rose.
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What the Markets Are Saying
Yesterday was the last day of the quarter and, as usual, institutions were positioning some stocks that already had gains, a practice that Wall Street calls “prettying up portfolios.” But the last 45 minutes of trading may have revealed the true trend, as sellers drove the Dow (DJI) down more than 115 points on the highest volume of the day.
The good news was that the major indices managed to hold above their respective 20-day moving average lines. But the S&P 500 (SPX) failed to hold the 800 level and many technicians felt that it was necessary to stay above that “psychological number” if the rally was to continue.
Most importantly is that momentum on the S&P 500 has fallen from a record high to just above “flat line” in just six trading sessions, and that’s enough to give any bull nightmares. The last time the market had a momentum crush of that magnitude was in December 2007 just before the big fall from SPX 1,477 to 1,308.
So with the new quarter upon us, the bulls may have no place to hide since every internal indicator is now telling us to expect a modest to moderate sell-off. Our downside targets remain at S&P 752 to 737.
Today’s Trading Landscape
Earnings to be reported include: UniFirst (UNF) and Worthington Industries (WOR).
Several economic reports are due including the MBA Mortgage Applications for March 27, March Automatic Data Processing (ADP) Employment Survey (the consensus expects a loss of 646,000), March Institute for Supply Management (ISM) Manufacturing Index (the consensus expects 35.8), February Construction Spending (the consensus expects a 2% drop), February Pending Home Sales (the consensus expects 0.1%), and U.S. Energy Department Oil Inventories for March 27.
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Sam Collins is a registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.
