On Thursday, stocks again had some rough early moments, but after falling 50 points on the opening they rallied, and by 11 a.m. were back to breakeven. The remainder of the day saw some buying in the financials, and that helped offset profit-taking in the materials group, so by the end of the day most stocks had achieved small advances.
Better-than-expected jobless claims had almost no impact on the opening. However, later in the day when the retail sales numbers for December came in higher than expected, a mild rally overcame the early losses.
As the day wore on, it became apparent that despite some favorable upgrades, the best that could be achieved was a small gain. The Dow Jones Industrial Average (DJI) was helped by a positive report on General Electric (GE), up 5.2%, and an upgrade on Bank of America (BAC), which rose 3.3%.
If one word could be used to describe yesterday’s market it would be “cautious.”
What is bothering traders most is today’s U.S. jobs data, as well as fear that Q4 earnings, which begin next week, will not live up to expectations.
Another uncertainty that has an impact on many stocks is the direction of the U.S. dollar, and yesterday the Dollar Index was up 0.6%. The increase had a direct negative impact on futures, driving the UBS Commodity Index off 1.5%.
At the close, the Dow gained 33 points to 10,607, the S&P 500 (SPX) rose 5 points to 1,142, and the Nasdaq (NASD) fell 1 point to 2,300.
Volume on the NYSE is improving, but still not at last year’s levels. Yesterday, the Big Board traded just under 1.2 billion shares with advancers over decliners by 3-to-2. The Nasdaq traded 647 million shares, and advancers were ahead by about 5-to-4.
Almost all futures contracts were negatively impacted by the small rise in the dollar. February Crude Oil fell for the first time in ten days, down 52 cents to $82.66 a barrel. The Energy Select Sector SPDR (XLE) ended at $59.91, off 9 cents.
January gold fell $2.80 to $1,133.10 an ounce, and the PHLX Gold/Silver Sector Index (XAU) fell $1.55 to $179.21.
What the Markets Are Saying
Despite the boring grind, the markets continue to move ahead with both the Dow and the S&P 500 making new 12-month intraday and closing highs. And even though both are up just fractionally from Monday’s big run-up, they are making progress.
As for the Nasdaq, despite a lower close yesterday, the index remains the strongest of the major indices. It is, of course, more volatile by virtue of its heavy weighting of technology stocks. But that is also why it has outperformed its peers and commands a higher price-to-earnings ratio.
Chartwise, the Nasdaq demonstrated the reason for its premium over the other indices by breaking from the constraining bonds of the oft-mentioned four-month trading rectangle by gapping through the upper range of the barrier for what is termed a “breakaway gap.”
A performance like that deserves the attention of investors, and they responded by running the index up 4.5% from the breakout on Dec. 21, while the Dow advanced just over 1% and the S&P 500 2.5%.
Yesterday, the Nasdaq closed lower for the second consecutive day, but like the Dow and the “500,” closed very near to its intraday high. Momentum on all of the indices continues to favor the bulls. But Nasdaq’s buyers will more than likely be content to pay the higher premium for the better performance.
Today’s Trading Landscape
Earnings to be reported before the opening include: AZZ Inc. (AZZ), The Greenbrier Companies (GBX) and PriceSmart (PSMT).
Economic reports due: employment situation (the consensus expects 10% for non-farm payrolls, and 10.1% for the unemployment rate), wholesale trade and consumer credit (the consensus expects -$5 billion).
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