A week of dizzying action resulted in a loss of 0.7% for the Dow Jones Industrial Average (DJI) and a loss of 0.4% for the S&P 500 (SPX). However, for the month, both gained, with the Dow up 2.6% and the S&P 500 up 2.95%. The Nasdaq (NASD) fell 0.3% for the week, but rose 4.2% for the month.
After some very volatile days last week, Friday turned into a dull session with the indices trading within a very narrow range. The lack of interest in stocks could have been the result of investor fatigue or confusion over mixed economic data.
There was good economic news in the form of a much higher-than-expected upward revision in Q4 GDP to a 5.9% annual rate, but the offset was a surprising decline in existing home sales in January. Sales were reported as a 7.2% drop month over month to an annualized rate of 5.05 million units. The February consumer sentiment survey from University of Michigan came in at an expected 73.6.
The financial sector led the gainers in the session, but was up just 0.7%. Decliners were led by utilities, which fell 0.7%.
At the close, the Dow was up 4 points, closing at 10,325, the S&P 500 gained 2 points to 1,104, and the Nasdaq rose 4 points at 2,238.
The NYSE traded 1.2 billion shares with advancers ahead of decliners by 9-to-6. On the Nasdaq, 710 million shares were traded and decliners were ahead by 7-to-6.
On Friday, April crude oil rose $1.49 to $79.66 a barrel, and the Energy Select Sector SPDR (XLE) rose 13 cents to $56.14.
April gold gained $10.40 to settle at $1,118.90 an aounce, with traders encouraged by a possible plan to solve the financial crisis in Greece. The PHLX Gold/Silver Sector Index (XAU) rose 1.39 points to 161.67.
What the Markets Are Saying
Although last week had its violent surges and declines and closed slightly lower, the S&P is still within the boundaries of 1,115 to 1,150 on the top and 1,020 to 1,070 on the bottom. Near term, the support for the “500” is at Thursday’s low of 1,086.
When stuck in solid zones we go to our set of internal and sentiment indicators for guidance.
The internal indicators — chiefly Moving Average Convergence/Divergence (MACD), stochastic, momentum and Relative Strength Index (RSI) — are somewhat overbought near term, but not excessively overbought long term. The sentiment indicators are neutral.
It seems that we are back where we started, so let’s go to the volume and breadth for help: Volume has been weak on rallies and stronger, but not excessively stronger, on down days. Breadth has been irrationally unstable with strong sellers on some days and strong buyers on others. Again, not much help.
But there are some changes in the foreign markets that bear scrutiny. Foreign markets have been weak with emerging market indices and ETFs turning negative, while the U.S. dollar has turned bullish long term and gold has been strong.
The DB US Dollar Index Bullish Fund (UUP) last week issued a major buy signal for the U.S. dollar as the 50-day moving average crossed the 200-day. Technicians refer to this as a “gold cross,” and it’s a powerful bull market signal for the U.S. dollar.
On the other hand, the iShares Trust FTSE/Xinhua China 25 Index Fund (FXI) has executed a “death cross” — a powerful bear market signal for this ETF.
What does it all mean? A flight to safety as investors flock to the U.S. dollar and gold as safe havens in rough foreign seas.
Today’s Trading Landscape
Earnings to be reported before the opening: AMAG Pharmaceuticals, Armstrong World Industries, BPZ Energy, Central European Distribution, Crosstex Energy, Dillard’s, DISH Network, Echostar Holdings, Edison, El Paso, El Paso Pipeline Partners, Integra LifeSciences, Intrepid Potash, Isis Pharmaceuticals, Mariner Energy, Overseas Shipholding, Perfect World, Public Storage, Quicksilver Gas, Quicksilver Resources, Regency Energy, Rowan Companies, Scientific Games, Sotheby’s, Southern Union, Targa Resources, Tower Group, USEC and Warner Chilcott.
Earnings to be reported after the close: ABM Industries, Airmedia, Amerisafe, Carmike Cinemas, China Distance Education, Comfort Systems USA, Dress Barn, Haverty Furniture, Human Genome Sciences inc., Hypercom, MarkWest Energy, MBIA, McDermott, Mindray Medical, NutriSystem, Questcor Pharmaceuticals, Sequenom, Sykes Enterprises, The9 Ltd., Titanium Metals, TNS and Warnaco Group.
Economic reports due: personal income and outlays (the consensus expects 0.4% for both), ISM manufacturing index (the consensus expects 57.5), and construction spending (the consensus expects -0.8%).
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