The first day of March was a chip day. Not necessarily blue chip, but certainly computer chip, as Intel (INTC) rose 1.7% and SanDisk (SNDK) climbed 12%. The market was also encouraged by strength in manufacturing and consumer spending.
All three of the major indices were strong throughout the day. And even though the S&P 500 (SPX) had difficulty climbing above 1,115, a psychologically important barrier, a push late in the session managed to get the job done. By doing so, the S&P achieved a net gain for the year.
And gains were made despite a stronger U.S. dollar and the earthquake in Chile. The Chilean catastrophe drove prices of copper higher since Chile is a major world exporter of the metal and the mines are generally closed as a result of the quake.
Economic data was basically ignored by investors. Personal income for January was reported up 0.1%, but that was below the forecast of 0.4%, and spending for January increased 0.5%, which was slightly better than the expected rate of 0.4%. The ISM manufacturing index for February was a disappointment, coming in at 56.5 versus an expected 57.9.
Mergers played a role in the advance, and especially had a positive impact on Europe’s bourses. German drug firm Merck KGaA (MRK) announced the acquisition of Millipore (MIL) for $7.2 billion. And Prudential PLC (PUK) agreed to buy a pan-Asia insurance business from AIG (AIG).
At the close, the Dow Jones Industrial Average (DJI) was up 79 points to 10,404, the S&P 500 rose points to 1,116, and the Nasdaq (NASD) gained 35 points at 2,274.
But volume was very low at just 966 million shares on the NYSE, where advancers were ahead of decliners by 3-to-1. The Nasdaq traded 688 million shares and advancers there were ahead by more than 3-to-1.
Crude oil for April delivery fell 96 cents to $78.70 a barrel, and the Energy Select Sector SPDR (XLE) closed at $56.66, up 52 cents.
March gold fell 50 cents to $1,117.80 an ounce, and the PHLX Gold/Silver Sector Index (XAU) gained 2.72 points to 164.11.
What the Markets Are Saying
Yesterday, each of the major indices closed above their respective 50-day moving averages. But the real winner was the Nasdaq, which not only surmounted the barrier, but rose more than 35 points, exceeded its February high of 2,251, and led the other indices by a wide margin.
The other major indices, except the NYSE Composite, also closed above their 50-day moving averages.
Under normal circumstances, this would be considered a major technical happening. But the indices have worked on this barrier for a long time, so a major penetration should be accompanied by huge volume. Without that volume, there is no confirmation. So with just 966 million shares trading on the NYSE, the advance is far from convincing. Breadth was good at 3-to-1 on the Big Board, but breadth alone cannot solve the market’s current malaise.
With our internal indicators overbought and the sentiment numbers neutral, we need more convincing evidence that the highs of early January will soon give way to a push higher. And that evidence should come in the form of at least 1.5 billion shares.
Until then we remain on the sidelines, taking profits, or testing the short side of the market.
Today’s Trading Landscape
Earnings to be reported before the opening include: Allis-Chalmers Energy, ArQule, AutoZone, Boots & Coots, Boyd Gaming, Bridgepoint Education, China Real Estate, China Security and Surveillance, Cooper Tire & Rubber, CryptoLogic, Domino’s Pizza, Fresh Del Monte Produce, Hercules Offshore, Rigel Pharmaceuticals, Staples, Tech Data and United Natural Foods.
Earnings to be reported after the close: Alon USA Energy, Applied Signal, Archipelago Learning, Big 5 Sporting Goods, BTU International, Casella Waste, China Nuokang Bio-Pharmaceutical, Churchill Downs, Copart, Eagle Bulk Shipping, Hovnanian Enterprises, Internap, IPCS, JAKKS Pacific, Kenneth Cole, Martek Biosciences, PDL BioPharma, RehabCare, URS, VeriFone Holdings and VisionChina Media.
Economic reports due: motor vehicle sales (the consensus expects 7.9 million), ICSC-Goldman Sachs store sales and Redbook.
Quarterly earnings news (earnings vs. expected):
- CryptoLogic (CRYP): $1.97 vs. 13 cents
- Fresh Del Monte Produce (FDP): 36 cents vs. 34 cents
- Staples (SPLS): 38 cents vs. 39 cents
- Tech Data (TECD): $1.25 vs. $1.01
Late news: According to the Wall Street Journal, Greece is prepared to outline a new austerity package of about 4 billion euro on Wednesday, and a plan led by Germany and France to bail out Greece could amount to $41 billion.
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