Without some strong buying in the commodity-based stocks yesterday, the market would have fallen to a minus due to weakness in the big technology stocks. But buying in precious metals and energy helped to stabilize the stock market, and the U.S. dollar again fell versus a basket of world currencies.
The market was held back primarily due to several economic reports that failed to inspire stock buyers. The first, the ADP employment report, said that 84,000 jobs were lost in December versus an estimated job loss of 75,000. Next, the December ISM service index came in at 50.1, up from 48.7 in November, but still shy of the 50.5 that was predicted by economists.
Finally, the minutes from the last FOMC meeting revealed that some members think that more stimulus might become desirable, and that put more pressure on the dollar. But notes from the meeting also indicated that the Fed governors will probably keep interest-rate targets low, so the markets traded flat with relatively minor good news offsetting relatively minor bad news.
At the close, the Dow Jones Industrial Average (DJI) rose 2 points to 10,574, the S&P 500 (SPX) was slightly higher at 1,137, and the Nasdaq (NASD) fell 8 points to 2,301.
The NYSE traded 1.1 billion shares with advancers ahead of decliners by just less than 3-to-2. The Nasdaq traded 643 million shares with decliners ahead by 7-to-5.
February crude oil settled at $83.18 a barrel, up $1.41. It was the 10th consecutive session higher for crude, and the Energy Select Sector SPDR (XLE) rose 71 cents to $60, almost matching the level made on Oct. 21 of $60.56.
Gold for January delivery rose $17.80 to $1,135.90 an ounce amid concerns over inflation and pressure from an influx of new investment money. The PHLX Gold/Silver Sector Index (XAU) rose $4.74 to $80.76.
What the Markets Are Saying
If investors want to consistently make money in stocks, they must be in the sectors that are outperforming the broad market. And, in the last month, those sectors have been confined to basic materials (precious metals, non-ferrous metals, steel, coal, etc.), oil and gas, and health care.
And sometimes even the broad categories are not enough to generate success. For example, even though the health care sector gained 2.63% last month, the pharmaceuticals were barely higher and biotechs were sharply lower, while health care providers gained 8.24%.
Furthermore, what was in favor in the last cycle is not necessarily so anymore. For example, technology, which was up 57.34% last year, is hardly participating at all this week, and yesterday the group was dragged down by a lack of performance in the major technology stocks.
Even so, my eye is on the techs since they are almost always at the forefront of a major market advance. Their lack of participation could be providing us with an excellent buying opportunity.
With competition for investors’ bucks at an all-time high, online brokers provide excellent data and advice concerning sector performance, and most full-service firms provide this, as well.
Today’s Trading Landscape
Earnings to be reported before the opening: Constellation Brands, Lennar, MSC Industrial and Texas Industries.
Earnings to be reported after the close: Apollo Group, Carter Holdings, Demandtec, DragonWave, Global Payment, IHS, Lawson Software, Nu Horizons Electronic and Schnitzer Steel.
Economic reports due: chain store sales, Monster Employment Index, jobless claims (the consensus expects 45,000), EIA natural gas report, Fed balance sheet and money supply.
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