On the lowest volume day of the year, stocks managed a 30-point rally in the last five minutes of trading Friday, to post a gain for the day. But the gain came after falling on the opening and holding the losses for most of the session.
The low volume was due in part to a computer failure that had shut down trading on the NYSE on 242 stocks for 40 minutes, including three of the Dow 30: Merck (MRK), Exxon Mobil (XOM) and General Electric (GE). Despite the shutdown, many orders were redirected to other exchanges, but when trading resumed it was clear that many traders had taken off for a long weekend.
Technology stocks opened sharply lower and were under pressure for most of the day. Semiconductor stocks were hit the hardest as a result of National Semiconductor’s (NSM) Q4 loss, reported after Thursday’s close. NSM fell more than 6%, and the Philly Semiconductor Index (SOX) was off more than 3%.
Treasury prices rose despite the Wall Street Journal reporting that it is unlikely that the Fed will boost its purchases of Treasury and mortgage-backed paper this month. The U.S. dollar rallied in the hope that the Fed would protect the value of the dollar by cutting back on Treasury purchases that would result in lower rates.
At the close, the Dow Jones Industrial Average (DJI) was up 28 points, closing at 8,799. The S&P 500 (SPX) gained a point to close at 946, and Nasdaq (NASD) fell 4 points to close at 1,859.
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As noted, the NYSE traded only 858 million shares, and decliners outpaced advancers by 4-to-3. On Nasdaq, just 597 million shares were exchanged, and decliners were ahead by 7-to-6.
For the week, the Dow gained 0.4%, giving it a gain for the year of 0.3%. The S&P 500 rose 0.7%, up 4.8% for the year. And Nasdaq gained 0.5 %, up 17.9% for the year.
On Friday, crude oil for July delivery fell 64 cents to $72.04 a barrel, and the Energy Select Sector SPDR (XLE) lost 52 cents, closing at $53.51. August gold fell $21.30 to $940.70 an ounce, and the PHLX Gold/Silver Index (XAU) fell to $145.12, down $4.56.
What the Markets Are Saying
Investors and traders alike appear to be getting frustrated with the very narrow trading range of the last couple of weeks. Apart from the computer failure on Friday, volume on the Big Board has been declining steadily, and with it the likelihood of a significant upside breakout.
For 10 days the S&P 500 has been stuck in a trading range bounded by 930 and 950. Since June 2, when the S&P closed at 945, the index attempted to close above it five of the next seven days and failed.
This area of resistance may seem small, but it is important in that it represents the prior high in January, which led to a panic sell-off. It is bounded on the top by the 210-day exponential moving average and on the bottom by the 200-day simple moving average.
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A break above 950 would likely lead to a quick advance to 1,000, and even the possibility of a major breakout. But a failure after so many attempts would probably result in a fall to at least 900, and possibly even to 800.
Tomorrow we’ll look at some individual sectors for a clue as to the future direction of the market. For now, the market is being very coy as to whether it wishes to be a bull or a bear.
Today’s Trading Landscape
Earnings to be reported include: Casella Waste Systems (CWST), Casey’s General Stores (CASY), EasyLink (ESIC), La-Z-Boy (LZB), Motorcar Parts of America (MPAA), National Technical Systems (NTSC) and Synutra International (SYUT).
Economic reports due: June Empire State Manufacturing Survey (the consensus expects -3), April Treasury International Capital and April NAHB housing market index.
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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 his most recent market outlooks.
