Yesterday’s economic data was positive with the release of the Fed’s Beige Book at center stage, showing that the economy was gradually improving. Although payrolls were down by 20,000 (an expected number), the ISM services index for February came in at 53, which was several points better than expected.
The initial impact was that stocks rallied, but by 11 a.m., the market was exhausted and sold off for the rest of the day. Even the weakness in the U.S. dollar and a stronger euro due to Greece’s new austerity plan failed to halt the selling that began mid-morning. The afternoon’s losses wiped out a Dow Jones Industrial Average (DJI) gain of over 60 points made in the first 90 minutes of trading.
Volume was again very light as the market appears abnormally focused on the unemployment numbers coming up on Friday.
The afternoon sell-off was led by the pharmaceutical group following an early morning report that a co-developed experimental Alzheimer’s treatment by Pfizer (PFE) and Medivation (MDVN) failed to show positive results. And heavy selling of the health care group occurred late in the day after a statement from President Obama that he is seeking to push the “long and wrenching debate” over health care into its final stages.
Health care was the worst performer, down 0.5%, while the strong economic data helped basic materials (up 1%) and energy (up 0.2%).
At the close, the Dow was down just over 9 points to 10,397, the S&P 500 (SPX) gained fractionally to 1,119, and the Nasdaq (NASD) fell slightly to 2,281.
The NYSE traded just 937 million shares with advancers ahead of decliners by 8-to-7. The Nasdaq traded 694 million shares, and breadth was flat.
Better economic data led to a gain in April crude oil, up $1.19 to $80.87 a barrel. The Energy Select Sector SPDR (XLE) closed at $57.38, up 25 cents.
April gold rose $5.90 to $1,143.30 an ounce, and the PHLX Gold/Silver Sector Index (XAU) rose 2.32 points to 170.28.
What the Markets Are Saying
The markets are still stuck in a narrow trading range. Even after apparently clearing the 50-day moving averages of the major indices, volume contracted from the weak numbers of the past five trading sessions.
The best that may be said of the current technical situation is that the trend is still up. And yesterday, one of my favorite indices, the broad-based NYSE Composite Index, put some distance between the close and its 50-day moving average. The index closed at 7,165, up 29 points. Its 50-day moving average is at 7,127.
There are a few groups that continue to move ahead. Gold and precious metals, and coal are strong. But other oft-mentioned groups, even the highly touted technology sector, are up one day and down the next — except for semiconductors, which have been rising since early February. The consumer goods group is strong and broke out again yesterday.
It may be that investors are focused on tomorrow’s jobs numbers. But solid, powerful breakouts are not usually dependent upon a news event for support — especially one that is so regularly reported. In fact, the strongest breaks usually are in the face of bad news.
I remain cautious, but optimistic longer term.
Today’s Trading Landscape
Earnings to be reported before the opening include: American Ecology Corp., Babcock & Brown Air, Bio-Reference Labs, Ciena, Consolidated Communications Illinois, Cornerstone Therapeutics, Del Monte, Fuel Systems Solutions, Gerber Scientific, H&E Equipment Services, Inspire Pharmaceuticals, Medifast, Methode Electronics, Micromet, Midas, Monotype Imaging, Nash Finch, Natus Medical, Orion Marine, Penwest Pharmaceuticals, Perficient, Ritchie Bros, Suntech Power, SXC Health Solutions, Teekay Shipping, U.S. Physical Therapy, Urban Outfitters, Wendy’s and Western Refining.
Earnings to be reported after the close: 51job, AMN Healthcare Services, ArcSight, AthenaHealth, Cooper Companies, DepoMed, Dynamic Materials, Emergent BioSolutions, Energy Recovery, Equity One, Giant Interactive, Martin Midstream, Marvell Technology, Medidata Solutions, Mentor Graphics, Move, PC-TeL, S1 Corp, Silver Wheaton and Union Drilling.
Economic reports due: chain store tales, Monster Employment Index, jobless claims (the consensus expects 475,000), productivity and costs (the consensus expects 6.3% for non-farm productivity, and -4.5% for unit labor costs), RBC CASH Index, factory orders (the consensus expects 2%), pending home sales, EIA natural gas report, Fed balance sheet and money supply.
Quarterly earnings news (earnings vs. estimated):
- Babcock & Brown Air (FLY): 45 cents vs. 29 cents
- Canadian National Resources (CNQ): $1.23 vs. $1.38
- Ciena (CIEN): 12 cents vs. 6 cents
- ENGlobal (ENG): 3 cents vs. 2 cents
- Fuel Systems Solutions (FSYS): $1.12 vs. 98 cents
- Methode Electronics (MEI): 11 cents vs. 3 cents
- Suntech Power (STP): 27 cents vs. 11 cents
- Urban Outfitters (URBN): 45 cents vs. 40 cents
- Western Refining (WNR): 58 cents vs. 68 cents
Late news: The Greek government asked banks to plan a much-awaited 10-year bond issue in hopes of raising between $4.11 billion to $6.85 billion to help cover short-term funding gaps, according to the Wall Street Journal.
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