After a week of gains, investors returned from a long weekend ready to nail down profits. The focus of the selling was the financial group, as worries over European banks dominated yesterday’s news.
The KBW Bank Index fell 3.2%. American Express Company (NYSE: AXP) was down 4.1%, JPMorgan Chase & Co. (NYSE: JPM) fell 2.3%, Bank of America Corporation (NYSE: BAC) was off 2.2%, and Barclays PLC (NYSE: BCS) fell 5.9%.
Oracle Corporation (NASDAQ: ORCL) was up 5.9% following the naming of former Hewlett-Packard Company (NYSE: HPQ) CEO Mark Hurd as co-president. Later HPQ said it would sue Hurd for allegedly violating confidentiality agreements.
The selling of stocks resulted in a rush to buy Treasuries. The 10-year note’s yield fell to 2.61%. And the greenback rose 0.9% versus a basket of currencies. The euro fell 1.4% to $1.2695.
At the close, the Dow Jones Industrial Average fell 107 points to 10,341, the S&P 500 lost 13 points at 1,092, and the Nasdaq was off 25 points to 2,209.
The NYSE traded 830 million shares with decliners ahead of advancers by 2.8-to-1. On the Nasdaq decliners were ahead by 3.4-to-1 on volume of 493 million shares.
Crude oil for October delivery fell 51 cents to $74.09 a barrel. The Energy Select Sector SPDR (NYSE: XLE) fell 81 cents to $53.39.
December gold rose $8.20 to $1,259.30 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) gained 0.56 points, closing at 187.37.
What the Markets Are Saying
After a brief respite, volatility is back in the game. Last week’s impressive run by the S&P 500, which resulted in a gain of 3.7%, gave way to profit-taking and a decline yesterday of 1.15%. And the CBOE Volatility Index (VIX) jumped more than 11%.
But yesterday’s volume was one of the lowest of the year, and after four days of gains it’s hard to treat the tape action as a serious reversal. With a low of S&P 500 1,091.15, the pullback partially closed an upside gap opened Thursday at 1,090.1 to 1,093.61. We could see a bit of weakness today, closing the gap and, thus, setting up for the S&P 500 to make another run at the 200-day moving average at 1,115.03.
There was one other technical curiosity yesterday: A trendline drawn from the April high to the August high may have been a barrier to Friday’s advance. The high at 1,105.1 falls almost precisely on that resistance line and could become a barrier to a further advance, especially if the S&P 500 fails to turn quickly and take out Friday’s high.
The long-term trend is still bearish; the intermediate trend is neutral and still within the summer’s trading range of 1,040 to 1,130; and the short-term trend is up.
For one stock that appears to be in an uptrend, see my Trade of the Day.
Today’s Trading Landscape
Earnings to be reported before the opening include: Ciena, Hi-Tech Pharmacal, Jackson Hewitt, Smithfield Foods, Talbots, Titan Machinery and United Natural Foods.
Earnings to be reported after the close include: AeroVironment, C&D Technologies, Men’s Wearhouse, Shanda Games and Shuffle Master.
Economic reports due: Bank Reserve Settlement, MBA purchase applications, ICSC-Goldman Sachs store sales, Redbook, quarterly services survey, Beige Book and consumer credit (the consensus expects -$3.5 billion).
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
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