For the second day, stocks were influenced by a cut in the credit rating of a foreign country. On Tuesday, it was Greece that was cut by Moody’s; yesterday Spain was downgraded by Standard & Poor’s to negative from stable.
So stocks opened lower, but the U.S. dollar rallied on a report from the Commerce Department that inventories for U.S. wholesalers had an increase in October after 13 straight declines.
Commodities had their worst day in a month, led by crude oil, which fell for the sixth straight day. Crude is down 9.8% in just six days, its worst losing streak in five months. Traders said that the weekly rise in U.S. reserves of refined fuels contributed to the losses.
Technology stocks did well yesterday, and semiconductors led the pack with a gain of 0.6%. The gain in semiconductors was most impressive considering the fact that one of the biggest companies in the group, Texas Instruments (TXN), fell sharply, but the group gained in spite of the loss.
Although the day turned out to be mixed, there was enough volatility to keep traders pleased.
At the close, the Dow Jones Industrial Average (DJI) was up 51 points to 10,337, the S&P 500 (SPX) rose 4 points to 1,096, and the Nasdaq (NASD) gained 11 points to 2,184.
The NYSE traded 1.1 billion shares and decliners were ahead by just a few shares. The Nasdaq traded 578 million shares with advancers outpacing decliners by just under 2-to-1.
On the futures front, crude oil was hit hard with a decline of $1.95 to $70.67 due to higher inventories of fuels. The Energy Select Sector SPDR (XLE) closed unchanged at $54.82.
Gold (December contract) fell $22.40, closing at $1,120.40 — its fourth consecutive loss. The PHLX Gold/Silver Sector Index (XAU) fell $6.86 to $172.11.
What the Markets Are Saying
I always find MarketWatch’s Michael Ashbaugh’s column to be of interest. On Wednesday, he pointed out that the market has absorbed two “significant catalysts” in just the last seven sessions. The first was the Dubai crisis, which had, and has, dramatic international implications. The other was last week’s unexpectedly strong jobs report.
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The Dubai news had the potential to break the market lower, while the jobs report could have broken the indices to new highs.
The point is that the market is so “range-bound” that, despite the market’s attempt to break, it held both its low at S&P 1,085, and its high at 1,113.
A new high to just over 1,119 was made on Friday, but since then it appears to have failed with the index now below its 20-day moving average.
And this new failure established a triple- or quadruple-top that, if penetrated with a new closing high, could launch the market to its next goal of S&P 1,245 — but I’m getting ahead of myself (and Michael, too.)
The point is that this consolidation is the tightest pattern since the March low, and that it is a constructive, or positive, development. Although, as Michael points out, if the index was to fall below the 50-day moving average, now at 1,085.35, and the gap at 1,072, his next support is at 1,072 to 1,085. If that second zone was penetrated, it would signal a change in the intermediate trend.
Michael’s numbers very closely match mine, and I agree that the consolidation is a bullish pause in, I hope, a very powerful and yet to be achieved bull market top sometime in the far-off future. But for now, I’ll wait for the market to break the triple-top before I commit new funds.
Today’s Trading Landscape
Earnings to be reported before the opening: Ciena, Costco, Cubic, Dollar General, Gildan Activewear, Methode Electronics, Smithfield Foods, Titan Machinery and United Natural Foods.
Earnings to be reported after the close: Carter Holdings, CPI International, Esterline Technologies, Herley Industries, Learning Tree and National Semiconductor.
Economic reports due: international trade (the consensus expects -$36.4 billion), jobless claims (the consensus expects 460,000), RBC Cash Index, EIA natural gas report, Treasury budget (the consensus expects -$135 billion), Fed balance sheet and money supply.
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