Stocks closed mixed Tuesday, following a strong opening led by several Dow components coupled with support from the banking sector. But a weak consumer confidence number kept buyers in check, and the Dow closed fractionally higher with other indices closing in the red.
Before the opening, E.I. du Pont de Nemours & Company (NYSE: DD), UBS AG (NYSE: UBS), and Deutsche Bank AG (NYSE: DB) reported better-than-expected earnings. But there were other reports later on that did not live up to expectations. United States Steel Corporation (NYSE: X) missed its earnings target and fell sharply, taking most of the other related steel companies along with it.
The retail group fell 1.9%, which was a direct result of the consumer confidence report. Consumer confidence for July came in at 50.4, down from an expected 61, and lower than June’s 54.3. Office Depot, Inc. (NYSE: ODP) fell 7% after reporting that Q2 revenues were almost $50 million short of analysts’ expectations. Bed Bath & Beyond Inc. (NASDAQ: BBBY) fell 4%, and The Gap Inc. (NYSE: GPS) and Best Buy Co., Inc. (NYSE: BBY) both fell 3.9%.
The S&P Case-Shiller home price index showed that home prices rose in May. The index was up 1.3% versus April.
In a choppy market, utility stocks are sometimes considered a safer than growth stocks, and yesterday was no exception. The utility group was up 1.65% with Dominion Resources, Inc. (NYSE: D) and The Southern Company (NYSE: SO) up on the expectation of higher earnings to be reported today.
Treasuries, which are usually considered a “safe haven,” were down yesterday. However, the weakness in Treasuries can be explained by the successful offering of $38 billion of two-year notes. The 10-year note rose to 3.05%, and the yield on the two-year note was 0.63%.
At the close, the Dow Jones Industrial Average was up 12 points to 10,538, the S&P 500 slipped just over a point to 1,114, and the Nasdaq fell 8 points to 2,288.
The NYSE traded just 1.1 billion shares with decliners ahead of advancers by 1.25-to-1. The Nasdaq crossed 590 million shares with decliners ahead by 1.33-to-1.
Crude oil for September delivery was off $1.48 to $77.50 on weakening economic data. The Energy Select Sector SPDR (NYSE: XLE) closed at $53.99, down 26 cents.
August gold fell $25.10 to $1,158 an ounce following data that home prices rose in May, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) fell 5.57 points to 166.25.
What the Markets Are Saying
In just one week, the bulls have made significant progress by overcoming several meaningful barriers. We covered the numbers yesterday, but here is a summary of the progress:
The Nasdaq has broken above its 200-day moving average at 2,261, the Dow punched through its 200-day at 10,402, and both have penetrated their respective bearish resistance lines, as well as their closing prices on Dec. 31, 2009. But both have yet to close above the important high of June 21. For the Dow that number is 10,627; for the Nasdaq it is 2,341.
The S&P 500 is still a special case since it has not closed above its 200-day moving average, now at 1,113.93. And it too has yet to exceed the high of June 21 at 1,131. But the index drove through its bearish resistance line Thursday, for a significant break that made the intermediate trend sideways.
In addition to the major indices, other encouraging signs are emerging. Copper (a traditional indicator of better industrial production) is on an upswing, transports have turned higher (another leading indicator), and some consumer names have turned up. But yesterday’s consumer confidence number will not give confidence to the bulls.
The remaining near-term technical barrier for the S&P 500 is its 200-day moving average, which should be exceeded this week. But that’s not as important as the high of June 21 for each of the indices, because that high has the potential of becoming a double-top. And if the bulls are not able to overcome it, the top could trap the averages in a sideways trading zone bounded by those highs and the July 1 lows. And the top could even turn out to be a lower high of a new intermediate downtrend, which, if extended, would break the still pending head-and-shoulders formation that missed being confirmed by just a fraction.
Yesterday’s reaction to some very positive earnings and an uptick in the Case-Schiller home price index was greeted by the market with a “ho-hum” — and that is not good. All of our internal indicators are now grossly overbought, and yesterday’s momentum indicator turned down. A heavy dose of higher volume on the buy side would help push the bulls along. But they are not out of the bears’ woods quite yet. If they hesitate now, they could allow the bears to claw victory from the hands of defeat.
Today’s Trading Landscape
Earnings to be reported before the opening include: ACCO Brands, Acxiom, Allegheny Technologies, Allos Therapeutics, Alvarion, AmeriGas Partners, Anadigics, ArcelorMittal, Arrow Electronics, AudioCodes, Avery Dennison, AVX Corp., Berry Petroleum, Boeing, Bruker Corp., Canadian Pacific, Ceva, CMS Energy, Coca-Cola Enterprises, Colfax, Comcast, ConocoPhillips, Constellation Energy, Corning, Cullen/Frost Bankers, Dixie Group, Dominion Resources, Eastman Kodak, Enbridge, FirstService, General Dynamics, Hecla Mining, Hess, Hospira, InterActive, International Paper, JMP Group, Jones Apparel, L-1 Identity Solutions, Lazard, M/I Homes, MarketAxess, Martha Stewart, MeadWestvaco, Melco Crown Entertainment, Mine Safety, Newmont Mining, Noranda Aluminum, NY Community BanCorp., Old Dominion Freight Line, PF Chang’s, Praxair, Rockwell Automation, RPC, Sealed Air, Silgan Holdings, Silicon Labs, Southern Co., Spectranetics, Sprint Nextel, Stoneridge, Stratasys, The Medicines Co., Timberland, UGI Corp., United Therapeutics, Universal Stainless/Alloy, ViroPharma, WABCO Holdings, Waddell & Reed, Waters, WellPoint, Wilson Greatbatch, Wintrust Financial, Wyndham Worldwide.
Earnings to be reported during trading hours include: Energen and Susquehanna Bancshares.
Earnings to be reported after the close include: Advance America Cash, Advanced Analogic Technologies, Agnico-Eagle Mines, Akamai Technologies, Alliance Imaging, AMAG Pharmaceuticals, American Capital Agency, American Railcar Industries, Ameriprise Financial, AMN Healthcare Services, Arris, AsiaInfo, Aspen Insurance, Assurant, BioMed Realty, BMC Software, Brandywine Realty, Cabot, Cadence Design, California Water, Callaway Golf, CardioNet, Cerner, Chemed, Cincinnati Financial, Citrix Systems, Clarient, Cliffs Natural Resources, CommScope, Community Health, Compellent Technologies, Concur Technologies, Covance, Crown Castle, Digital River, Dresser-Rand, DryShips, Duke Realty, Dynamics Research, Electro Scientific, Encore Wire, Entropic Communications, Equifax, Equinix, Equity Residential, Everest Re, Express Scripts, Extra Space Storage, FalconStor Software, Five Star Quality Care, Flowserve, FMC Corp., General Maritime, GoldCorp., Green Mountain Coffee, Green Plains Renewable Energy, GSI Commerce, GulfMark Offshore, Helix Energy, Highwoods Properties, Hill-Rom Holdings, Horace Mann, Huron Consulting, InterDigital, Interface, International Coal, iRobot, Itron, Kadant, Key Energy, Kirby Corp., Lam Research, Lincoln National, Logitech International SA, LoopNet, LSI Logic, ManTech, Merit Medical, Meru Networks, Metabolix, Methanex, Monolithic Power, Morningstar, Mylan Labs, Nektar Therapeutics, NetLogic, Neurocrine Biosciences, Newport, Nu Skin, Oceaneering International, O’Reilly Automotive, Orthofix, Owens-Illinois, PC Connection, PDL BioPharma, Pioneer Natural Resources, PSS World Medical, Quality Distribution, Quantum, Questcor Pharmaceuticals, RailAmerica, Realty Income, RightNow Technologies, Ryland Group, Sangamo BioSciences, Selective Insurance, Shutterfly, Skechers USA, Sourcefire, Spartan Stores, Spherion, Sturm Ruger, Sun Healthcare, Superior Energy Services, SureWest Communications, Symantec, Tal International, Teradyne, Tesoro, Tetra Tech, Torchmark Corp., Trinity Industries, TriQuint Semiconductor, Triumph Group, Tyler Technologies, Universal American Corp., Varian Medical, Vertex Pharmaceuticals, Visa, Vistaprint, Walter Energy, Whiting Petroleum, Willis Group and Woodward Governor.
Economic reports due: Bank Reserve Settlement, MBA purchase applications, durable goods orders (the consensus expects 1%), EIA petroleum status report and Beige Book.
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
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