Stocks rallied yesterday following a sharp pullback on the opening, as investors grappled with the late-night passing of major health care legislation and continuing problems with the economy of Greece. But it took just minutes after the opening bell for buyers to arrive on the scene.
By the close, the Dow Jones Industrial Average (DJI) was up 0.4% and the S&P 500 (SPX) had gained 0.5%. The Nasdaq (NASD) led the field again by rising 0.9%.
Health care stocks, especially hospital stocks, were strongly boosted by the new legislation. Community Health Systems (CYH) rose 6.6%, and Tenet Healthcare (THC) gained 9.04%, as a worst-case scenario for providers was avoided. Bristol-Myers Squibb rose 1.8%, St. Jude Medical (STJ) gained 1.1%, and Teva Pharmaceutical (TEVA) rose 2.2%.
But Greece’s economy continues to overshadow domestic gains. The U.S. dollar was strong early in the day following a statement from the German chancellor that “Greece doesn’t need financial support,” which was taken to mean that Greece rejected offers of help and was ready to “go it alone.” Later, however, the dollar fell back to even and closed slightly lower.
Boeing (BA) rose 1.7% following a raise in rating by Oppenheimer. AIG (AIG) fell 4.1% on news that its former CEO said that he would sell up to 10 million shares of his stock to UBS.
At the close, the Dow gained 44 points to close at 10,786, the S&P 500 rose 6 points to 1,166, and the Nasdaq gained 21 points to 2,395.
The NYSE traded 954 million shares with advancers over decliners by 3-to-1, while the Nasdaq crossed 631 million shares with advancers ahead by 5-to-2.
Crude oil for May delivery rose 63 cents to $81.60 a barrel, while the U.S. dollar closed lower, and stocks higher. The Energy Select Sector SPDR (XLE) fell 15 cents to $57.13.
April gold fell $8.10 to $1,099.50 an ounce, and the PHLX Gold/Silver Sector Index (XAU) rose 50 points, closing at 166.49.
What the Markets Are Saying
As a Wall Street Journal headline shouts “Dow Logs Ninth Gain in 10 Days,” it is important to understand the context of this Dow run-up. MarketWatch’s Michael Ashbaugh points out that the Dow had just completed the longest winning streak since 1996, when on Friday, the index fell 37 points. But, he notes that, “the winning streak amounted to just 227 points, which is no more than many single-day rallies.” And Friday’s reversal of 37 points took it back over 16% of the total rally. The rally, says Ashbaugh, “has genuinely pressed higher in slow motion.”
Yesterday, the market picked up where it left off on Thursday. The fully expected vote on health care resulted in a gain for the major indices, but with less than 1 billion shares trading on the NYSE. This is a very tired market that appears to be rolling over for a normal round of profit-taking.
The initial support for the S&P 500 would be the tenacious breakout point at 1,150. Following that is the 20-day moving average at 1,135, and finally the 50-day moving average at 1,113.
The CBOE Volatility Index (VIX) fell to a low of 16.17 on Friday. The last time we saw a number on the VIX that low was in May of 2008, just prior to the fall from 13,000-pluss to 10,970.
Raise cash and be defensive.
Today’s Trading Landscape
Earnings to be reported before the opening include: Carnival Corp., KB Home, Steelcase and Walgreens.
Earnings to be reported after the close include: Adobe Systems, Darden Restaurants, Jabil Circuit, Progress Software and Sonic.
Economic reports due: ICSC-Goldman Sachs store sales, Redbook, existing home sales (the consensus expects 5 million), and FHFA house price index.
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