On Monday, even though everyone seems to be talking about acquisitions, it was the fear of a slide in the economy that again resulted in more sellers than buyers. Stocks opened about 100 points higher, but within 20 minutes, the Dow began to slide. Modest bargain hunting in early afternoon buying took back some of the losses, but a late round of liquidations resulted in another minus day for the major stock indices, which closed at the low of the day.
Last week, Hewlett-Packard Company (NYSE: HPQ) announced that it would pay cash for 3PAR Inc. (NYSE: PAR), increasing an offer that had already been made by Dell Inc. (NASDAQ: DELL). And BHP Billiton Limited (NYSE: BHP) offered to acquire Potash Corp. of Saskatchewan (NYSE: POT). Yesterday, it was rumored that Campbell Soup Company (NYSE: CPB) is interested in a unit of Britain’s United Biscuits, and SABMiller is rumored to be interested in Australian brewer, Foster’s.
However, deflationary concerns were on investors’ minds despite no economic news. The greenback rose 0.2% as a result of global economic fears. A report from Moody’s Investors Service warned that growth in the euro zone may fall short of expectations and could lead to another round of rating cuts. The euro fell to $1.2662 versus the U.S. dollar. Treasuries rose, pushing the yield of the 10-year note down to 2.61%.
At the close, the Dow Jones Industrial Average was off 39 points to 10,174, the S&P 500 fell 4 points to 1,067, and the Nasdaq was down 20 points to 2,160.
The NYSE traded 864 million shares and decliners outpaced advancers by 1.7-to-1. The Nasdaq crossed 470 million shares and decliners there exceeded advancers by 2.85-to-1.
October crude oil fell 72 cents to $73.10 a barrel, and the Energy Select Sector SPDR (NYSE: XLE) closed at $52.21, up 2 cents.
December gold fell 30 cents to $1,228.50 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) fell 2.29 points, closing at 175.84.
What the Markets Are Saying
Yesterday, we considered the technical picture for the S&P 500. Now I’ll outline the technical outlook for Nasdaq.
On Aug. 11, the Nasdaq double-gapped down through its 50-day moving average for an immediate challenge of the support line at the May and August lows of 2,160 to 2,140. Since then, this technology-heavy index has been uninspiring for the bulls since every attempt to rally back through its 50-day moving average, now at 2,227, has failed. And yesterday, the Nasdaq closed at the low of the day, which happened to be the upper limit of the 2,160 to 2,140 zone of major support.
A late sell-off that ends a session at the low of the day is never a good sign, but to finish on a support line is a nasty event for the bulls. Today with just modest selling the Nasdaq could easily penetrate the 20-point support zone and challenge the July 2 close at 2,092.
Both the S&P 500 and Nasdaq are now holding onto their intermediate sideways trend by mere fractions of a point. The bulls had better bring in the buyers or the intermediate trend will turn as bearish as the short- and long-term directions.
Learn which tech sector you should short with an inverse ETF.
Today’s Trading Landscape
Earnings to be reported before the opening include: American Woodmark, Barnes & Noble, Big Lots, Burger King, Daktronics, Medtronic and Trina Solar.
Earnings to be reported after the close include: Dycom, Pacific Sunwear, rue21, The9 Ltd. and Verifone.
Economic reports due: ICSC-Goldman Sachs store sales, Redbook, and existing home sales (the consensus expects 4.65 million).
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
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