Monday was light on news and volume, but instead of a late sell-off that marked the last two sessions, yesterday the bulls managed to hang onto their modest gains. Sparked by a lower U.S. dollar, energy stocks (up 1.8%) led a small group of sectors higher with a demand for commodities and basic materials taking mining and other metals-related equities higher, too.
Dow components Exxon Mobil (XOM) and Chevron (CVX), both up around 1.1%, helped the Dow Jones Industrial Average (DJI) to a gain of 0.4%.
Crude oil was also higher due to a greater confidence in the economy. Optimism was fostered when the Dallas Federal Reserve reported that Texas factory activity had expanded for the fifth straight month, and the Commerce Department reported that personal spending in February had increased 0.3%, although personal income remained flat. Both were in line with expectations, and there was no other market-moving news.
Even though the broad market was generally higher, financial stocks were not in demand. Most lagged during the entire session, but the sector managed to finish with a 0.2% gain.
At the close, the Dow was up 46 points to 10,896, the S&P 500 (SPX) was up 7 points to 1,173, and the Nasdaq (NASD) gained 9 points to 2,404.
The NYSE traded 945 million shares with advancers ahead of decliners by just over 2-to-1. The Nasdaq traded 512 million shares with advancers there leading decliners by a little less than 3-to-2.
Crude oil prices rose sharply on confidence in the economic recovery and the weakness in the dollar. The May contract settled at $82.17 per barrel, up $2.17. The Energy Select Sector SPDR (XLE) closed at $57.17, up $1.09.
June gold gained $6.10 to close at $1,111.50 per ounce, and the PHLX Gold/Silver Sector Index (XAU) rose 3.13 points to 164.54.
What the Markets Are Saying
Yesterday’s modest rally may have taken some small pressure off of the bulls, but the net impact of two days of losses was still not overcome. Thursday’s key reversals loom just above Monday’s close, and the bulls had better set their sights on closing the gap to last week’s highs before the holiday weekend overcomes any further desire to own stocks.
With the market closed on Friday, and the most important economic report of the week (the jobs report) due that day, it will be fascinating to see if buyers are so optimistic over an increase in jobs that they would be willing to place their bets before the report is announced.
Analysts are expecting the non-farm payrolls to show that nearly 200,000 jobs were added in March. If the expectations are accurate, it would be the highest amount added since March 2007.
At this stage of the recovery, let’s review the progress of the key indices versus the significant Fibonacci numbers that have historically zeroed in on important targets and even tops. First the current closing high for the index, and then the Fibonacci 50% and 61.8% retracement numbers:
- Dow: 10,896, 10,350, 11,278
- S&P 500: 1,174 1,118, 1,225
- Nasdaq: 2,415, 2,061 2,249.
Only the Nasdaq has exceeded both the 50% and 61.8% retracements. The Dow and the S&P 500 have both reached the 50% retracement, but are still shy of the more significant 61.8% goal.
Perhaps the rally has further to go before a significant correction is to be anticipated — at least that’s what Mr. Fibonacci would say.
Today’s Trading Landscape
Economic reports due: ICSC-Goldman Sachs store sales, Redbook, S&P Case-Shiller home price index, State Street investor confidence and consumer confidence (the consensus expects 50).
Earnings to be reported before the opening include: Charming Shoppes, Cobalt International Energy, Layne Christensen and LDK Solar.
Earnings to be reported after the close include: EXFO, FSI International, H.B. Fuller, Landec, SAIC, Sealy and Team.
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