The Dow Jones Industrial Average (DJI) closed higher again yesterday — its eighth straight gain. Gains were more confined to the blue chips than the broad market, and focused on the Dow stocks, which closed at a 17-month high.
Boeing (BA) was the top performer in the Dow with a gain of 2.1%, but there were other strong performers in the index, too. DuPont (DD) gained 1.6%, and 3M (MMM) rose 1.8%. But Caterpillar (CAT) was down 0.27%, and that held back gains.
FedEx (FDX), Nike (NKE) and Guess (GES) announced better-than-expected earnings.
Bank of America (BAC) fell 1.5%, and JPMorgan Chase (JPM) fell 1%, as the financial stocks were weak over concerns that Congress would propose new financial regulations.
But, overall, there was little in the way of corporate news to have impact on the broad market.
Consumer prices in February were flat, and initial jobless claims fell last week. But there are still storm clouds over Greece, and the euro reflected that as it fell versus a basket of other currencies. Despite assurances by the EU, and especially Germany, worries continue that the significant amount of debt due in April will cause an economic collapse. Greece continues to resist help from other countries and the EU.
Materials stocks fell 0.7% as the U.S. dollar rose slightly due to the expectedly flat consumer price data.
At the close, the Dow was up 46 points to 10,779, the S&P 500 (SPX) fell slightly to 1,166, and the Nasdaq (NASD) rose 2 points to 2,371.
The NYSE traded 942 million shares with advancers ahead of decliners by 2-to-1. The Nasdaq crossed 566 million shares and breadth there favored advancers by 3-to-2.
The April crude oil contract fell more than $1 overnight over worries about Greece, but closed only 64 cents lower, at $82.29 a barrel, on a New York day-to-day price. The Energy Select Sector SPDR (XLE) fell 87 cents to $58.18.
March Gold rose $3.40 to $1,127.40 an ounce on a flight to safety over the Greek economic situation, and the PHLX Gold/Silver Sector Index (XAU) fell 1.17 points to 168.60. One trader was quoted by the Wall Street Journal as saying, “Gold at the moment is being bought not as a hedge against inflation, but as a hedge against currency difficulties.”
What the Markets Are Saying
Each day the market slogs along to new highs, and each day momentum seems to be slowing, only to be followed the next day by another new high. But yesterday, the upside was confined to the better-quality stocks. Volume contracted to one of the lowest of the year, which is unusual for a day before a quadruple witching expiration when four major classes of options go off the board.
There have been many reasons proposed as to why the volume has been consistently low, but one that seems most logical is that the public is, by and large, out of the market. And without public participation, we are deprived of the cushion against wild trading that steady public buying provides.
A week ago, we learned that mutual fund cash is down to only 3.6%, and much of that is derived from the inflow of public sources of funds. As evidence of the impact of the public’s purchasing power, consider the year-opening rally that resulted from the flow of cash from IRAs and other public pension sources.
Now without the public “cushion,” stocks are subject to sharp sell-offs since the market is in the hands of institutions that sometimes pull the trigger en masse and drive prices wildly lower.
S&P analyst Mark Arbeter noted recently that the major swings in the past six months are unusual in that they have been devoid of the usual backing and filling at key resistance and support areas. “In a sense, the market has become very one-dimensional at times with the uptrends and downtrends very strong and unrelenting. In our view, there seems to be a lot of hot money jumping into and out of the market, which is great for the nimble trader, but a nightmare for the rest of us.”
With the expiration of major options contracts today, it is likely that the current string of advances will come to an end. Let’s hope that the correction is not of the burn-and-pillage variety, but of the backing-and-filling type.
A correction of modest proportions with the usual backing and filling would be welcomed since it would bring prices back to more normal levels and establish a platform for a more orderly advance to new highs.
Today’s Trading Landscape
Earnings to be reported include: Perry Ellis.
There are no significant economic reports due today.
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