The second quarter of 2009 was one of the best quarters ever for stocks, as every major index closed with double-digit gains. But the last day of the quarter ended on a sour note, as weak consumer confidence numbers had investors heading for the exits.
The Conference Board released the consumer confidence for June, which showed a drop to 49.3 from 54.8 in May. Forecasts had indicated that confidence had returned, but the new numbers show otherwise.
Before the opening, the S&P/Case-Shiller index showed a small decline in home prices, and that had little impact on the market. But the consumer confidence numbers had a real impact. Sellers hit the tape almost immediately after the numbers were released.
Caterpillar (CAT) fell 4.9% as a direct result of the consumer confidence numbers. And Deere & Co. (DE) lost 5.2%, announcing that nearly 800 salaried workers have accepted buyout offers, which will cost DE about twice as much as first projected.
At the close, the Dow Jones Industrial Average (DJI) was down 82 points to 8,447, the S&P 500 (SPX) lost 8 points to 919, and the Nasdaq (NASD) fell 9 points to 1,835.
The NYSE traded 1.3 billion shares, and Nasdaq traded 675 million shares. On both exchanges decliners led advancers by about 5-to-3.
August crude oil fell $1.60 to $69.89 a barrel, and the Energy Select Sector SPDR (XLE) fell 29 cents to $48.05.
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August gold fell 30 cents to $940.70. The PHLX Gold/Silver Index (XAU) lost $4.62 and closed at $139.02. But the XAU is still trading in the middle of its bullish channel and just under the 50-day moving average. Its Moving Average Convergence/Divergence (MACD) just issued a buy signal, so the best guess is that the next move will be back to the upper part of the trading channel at $152 or so.
What the Markets Are Saying
Yesterday’s down volume accounted for 70% of the total volume on the NYSE, 78% on the S&P 500, and 70% on the Nasdaq. And even though volume was light, it was higher than on the days of recent gains, which is not a good sign.
There appears to be a real lack of follow-through on the Nasdaq. After vigorously breaking to a new high on June 11, the Nasdaq is looking very tired and barely able to hold above its 20-day moving average.
The low yesterday penetrated the 20-day, which is now at 1,826, and a close under it would force us to interpret the June 11 breakout as a false breakout. As I said yesterday, if that happens, look out below, because the next support for Nasdaq is at about 1,675.
All of our internal indicators are rising from oversold territory. But the advance is so lethargic that it is taking weeks to resolve a situation, which, two months ago, would have happened in a couple of days.
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As for sentiment, no change. It’s just as neutral as this time last week.
All of this adds up to a summer of lethargy.
With the temperature in the 90s and humidity sometimes in the 70s here in eastern Virginia, our Shih Tzu is moping around with the attitude that nothing will ever be the same again. Perhaps that’s why they call these “the dog days of summer.” It just seems that they will never end.
Today’s Trading Landscape
Earnings to be reported include: Constellation Brands, DemandTec, General Mills, Lindsay Corp., UniFirst and Unify Corp.
Economic reports due: June 26 Mortgage Refinance Application Survey, June ADP National Employment Report, June ISM Manufacturing Index, June Construction Spending, May pending home sales and June 26 U.S. Energy Department oil inventories.
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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.
