After an initial sell-off yesterday, which drove the Dow Jones Industrial Average (DJI) to a 130-point loss in the first 30 minutes of trading, stocks stabilized, then sold off late in the day, and then recovered most of the losses before the close.
The early selling followed the ADP employment change report for September, which came in below the consensus forecast by minus 54,000 jobs. This number of losses made traders edgy prior to Friday’s nonfarm payrolls report. But buyers surfaced after a report that revised Q2 GDP upward to show an annualized decline of only 0.7%, which was better than the prior report of a decline of 1.2%.
Better-than-expected earnings from Jabil Circuit (JBL) and Nike (NKE) helped the morning rally. And tech stocks rallied in the afternoon, with semiconductors standing out with a gain of almost 1%.
A strong commodities market helped stocks, too. And even though the day ended at a slight loss, the quarter turned out to be the second-best of the decade with a gain of 14.9%. The biggest surprise of all was the positive return of 2.7% for September.
At the close, the Dow was down 30 points to 9,712, the S&P 500 (SPX) lost 4 points to 1,057, and the Nasdaq (NASD) fell 2 points to 2,122.
The NYSE traded 18 billion shares with decliners ahead of advancers by about 3-to-2. The Nasdaq traded 865 million shares with decliners there ahead by slightly more than 3-to-2.
November crude oil rose $3.90 to $70.61 a barrel, and the Energy Select Sector SPDR (XLE) fell 35 cents to $53.92. The rise in crude’s price was attributed to increasing demand for fuel.
December gold rose $14.90 to $1,009.30 on a weaker U.S. dollar and higher oil prices. The PHLX Gold/Silver Index (XAU) gained $2.15, closing at $165.41.
What the Markets Are Saying
Each of the major indices has held at its 20-day moving average despite what many called a “key reversal day” on Sept. 23. And the current slowdown in trading has allowed some of the market’s internal indicators to adjust without any major trauma.
Further adding stability to stocks, the 50-day moving average is rapidly moving up and is now just below the support line of the bull channel. This is very bullish to a technician since it gives buyers a platform to attack the highs of September.
If I’m right and we break into new highs, what groups will lead the attack?
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Since the greatest growth is still coming from technology, I would expect the techs to lead again. Banks, too, have been a leader and, after a modest pullback, could reassert themselves.
But for a market to move to the next level we must see more group rotation. Perhaps the homebuilders or some other laggards will emerge.
Currently there is little to identify which new sectors will take the spotlight, but I will continue to focus on this issue and pass on any clues as to the identity of the new winners.
Today’s Trading Landscape
Earnings to be reported include: Accenture (ACN), Constellation Brands (STZ), DemandTec (DMAN), Global Payments (GPN), Immucor (BLUD), Matrix Service Co. (MTRX), MSCI Inc. (MXB), Resources Connection (RECN) and Smart Modular Technologies (SMOD).
Economic reports due: Motor vehicle sales (the consensus expects 8 million), personal income and outlays (the consensus expects 0.1% for personal income, 1.1% for consumer spending), jobless claims (the consensus expects 537,000), ISM manufacturing index (the consensus expects 53.5), construction spending (the consensus expects -0.1%), pending home sales and EIA natural gas report.
Late news: Cisco Systems (CSCO) to buy the video conferencing firm Tandberg for $3 billion. Bank of America (BAC) CEO Ken Lewis said he will resign before year-end. GM said it will kill Saturn brand after a deal with Penske to save the company fell through.
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