Financial stocks rebounded from last week’s losses on stronger retail sales yesterday, but it was not enough to keep the broad market from a loss. After a round of buying that at one point had the Dow up by over 70 points, weak manufacturing data and a strong U.S. dollar resulted in steady selling that continued for the entire afternoon.

U.S. retail sales rose 1.2% in October. Ford Motor Company (NYSE: F) rose 4.3% to $17, its highest price since January 2004. Starbucks Corporation (NASDAQ: SBUX) rose 2%, Coach, Inc. (NYSE: COH) gained 1.5%, and Nordstrom, Inc. (NYSE: JWN) was up 1%.

The Federal Reserve Bank of New York’s Empire State Manufacturing Survey was expected to come in at 11.7 for November, but instead reported a loss of 11.1. And a bigger-than-expected increase in inventories in September could leave companies holding too much inventory if the holiday shopping season disappoints.

In corporate news, EMC Corporation (NYSE: EMC) fell 1.2% on its announced acquisition of Isilon Systems, Inc. (NASDAQ: ISLN) for $2.25 billion. BHP Billiton Ltd. (NYSE: BHP) abandoned its bid for Potash Corp. of Saskatchewan, Inc. (NYSE: POT), and the stock rose 0.8%. Lowe’s Companies Inc. (NYSE: LOW) fell 1.1% after reporting that its fiscal Q3 earnings rose, but that sales fell more than expected, and it lowered its earnings forecast for the year. 

Treasuries fell, driving the benchmark 10-year note up to 2.95% — its highest yield since August. The dollar rose to its strongest level against the euro since late September. The euro closed at $1.3569, down from $1.3693 late Friday.

At the close, the Dow Jones Industrial Average was up 9 points at 11,202, the S&P 500 was off 2 points at 1,198, and the Nasdaq fell 4 points to 2,514. The NYSE traded 877 million shares with decliners over advancers by 1.2-to-1. The Nasdaq exchanged 526 million shares with advancers over decliners by 1.2-to-1.

Crude oil for December delivery fell 2 cents to $84.86 a barrel, following the mixed U.S. economic figures. The Energy Select Sector SPDR (NYSE: XLE) dropped 32 cents, closing at $62.62. December gold rose $3 to $1,368.50 an ounce. But gold prices were held back by the stronger dollar. The PHLX Gold/Silver Sector Index (NASDAQ: XAU) fell 3.26 points to 212.84.

What the Markets Are Saying

Yesterday’s close, which cracked the 1,200 support line of the S&P 500, may prove significant. But for the second day, the S&P 500 found support at its 20-day moving average, now at 1,195. Curiously, the low of each day corresponded almost exactly with this slightly rising moving average, and yesterday’s close, which was less than 3 points above it, makes the 20-day the dominant near-term feature on the chart rather than the round number of 1,200.

Since the high of Nov. 5, the S&P 500 has closed lower in five of the past six sessions, forming a tight channel down on diminishing volume. Normally following so many days down on low volume, we would expect a rebound, and we may still get one, but not before the immediate support at 1,195 is penetrated and the bottom of the current broad support zone at 1,174 is tested.

Barring a break through 1,195 on high volume, the bulls are still in charge, but yesterday’s two-hour straight line sell-off leaves them more vulnerable than at any time in the past two weeks.

For one stock with a strong chart, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.