Friday morning, after absorbing the surprise announcement late Thursday of an increase in the discount rate, the market rallied, then it flattened around noon, and finally faded. By the closing bell, the midday high had been erased, but the market registered a slight gain for the day as most investors appeared to conclude that the Fed’s increase in rates confirmed that the economy was improving.
Banks and industrial stocks did well. Industrial stocks were led by Boeing (BA), which rose 1.1%. Utilities gained in reaction to an increase in U.S. production and modest inflation. The consumer price index (CPI), which is considered the major indicator of inflation, rose a modest 0.2% in January, which was better than an expected increase of 0.3%.
Stocks closed higher for the fourth consecutive day, and that gave the market a 3% gain for the week — its best performance in three months.
At Friday’s close, the Dow Jones Industrial Average (DJI) was up 9 points to 10,401, the S&P 500 (SPX) gained 2 points to 1,109, and the Nasdaq (NASD) rose 2 points to 2,244.
Volume on the NYSE totaled just 1.1 billion shares with advancers over decliners by 3-to-2. On the Nasdaq, 653 million shares traded with advancers ahead by 7-to-6.
March crude oil rose 75 cents to $79.81 a barrel due to a strike of French refinery workers. The strike occurred Tuesday, at Total SA (TOT), and there appears to be no settlement in sight. The Energy Select Sector SPDR (XLE) rose 22 cents to $57.36.
April gold gained $3.40 to settle at $1,122.10 an ounce, and the PHLX Gold/Silver Sector Index (XAU) closed at 165.29, up 2.32 points.
What the Markets Are Saying
Since the pullback from the Feb. 5 lows, the S&P 500 has rallied by a little more than 4%, which is a retracement of slightly more than a half of the decline from the January to February correction, while still failing to close above the all-important 50-day moving average.
That failure to close above such an important barrier is curious in that other indices, notably the Dow Industrials and the Nasdaq, have achieved that goal while two very broad-based indices — the “500” and the NYSE Composite — have not.
But I could be “splitting hairs” since the 50-day moving average for the “500” is at 1,110.5, and the index closed at 1,109.17. The NYSE Composite’s 50-day is at 7,134.42, and the index closed at 7,083.25.
But as these two very important indices approach not only their key moving averages but other technical barriers, breadth is weakening and volume is falling, which is not a good sign.
The next important technical barrier for the S&P 500 is the series of tops made in November and December at 1,120. If it can surmount this barrier and do so with gusto, i.e., increased volume and breadth, then we have a good chance of mounting an attack on the old highs.
Until then, I’ll watch and wait.
Today’s Trading Landscape
Earnings to be reported before the opening include: Cabot Oil & Gas, Campbell Soup, Constellation Energy, Cumberland Pharmaceuticals, Endo Pharmaceuticals Holdings, Geo Group, Lincoln Electric, Lowe’s, MedAssets, Oil States, Orbotech, Quanta Services, Valassis and Valeant Pharmaceuticals.
Earnings to be reported before after the close: American Public Education, Bidz.com, Brocade Communications, CB&I, Ciber, CommScope, Covanta, DTE Energy, DTS, Ducommun, Echo Global Logistics, Exactech, Extra Space Storage, Forest Oil, Health Management, Healthcare Realty Trust, Healthsouth, IPC The Hospitalist, Kindred Healthcare, MercadoLibre, National Interstate, Nordson, Nordstrom, ONEOK, ONEOK Partners, Orbitz, Pegasystems, RadioShack Corp., Sequenom, St. Mary Land & Exploration Co., TeleTech Holdings, Texas Roadhouse, The9 Ltd., USEC and XenoPort.
There are no significant economic reports due today.
Late news:
Schlumberger (SLB) plans to acquire Smith International (SII) for $11 billion in stock.
Quarterly earnings news (earnings vs. estimated):
- Cabot Oil & Gas (COG): 52 cents vs. 45 cents
- Constellation Energy (CEG): 30 cents vs. 25 cents
- Lowe’s (LOW): 14 cents vs. 12 cents
- Quanta Services (PWR): 21 cents vs. 17 cents
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