The Dow Industrials fell again yesterday for the second day in a row, making it the sixth down day in the past eight sessions. Despite a sell-off that has taken back all of November’s gains and provided better values, investors were reluctant to invest while the threat of a tighter monetary policy in China and sovereign debt problems in Europe remain.
Financial stocks were hit hard following a Wall Street Journal report that the Federal Reserve will require all 19 banks that underwent stress tests to do it all over again. And the FDIC said that it is conducting around 50 criminal investigations of officers of U.S. banks that failed during the financial crisis.
Financials were down 0.6% with the following stocks showing losses:
- Bank of America Corporation (NYSE: BAC) down 2.7%
- JPMorgan Chase & Co. (NYSE: JPM) down 1.1%
- Regions Financial Corporation (NYSE: RF) down 6.4%
- Wells Fargo & Company (NYSE: WFC) down 1.2%
Consumer-discretionary stocks did well, rising 0.7%, with the following stock gaining:
- Target Corporation (NYSE: TGT) up 3.88%
- Coach, Inc. (NYSE: COH) up 3.3%
- BJ’s Wholesale Club, Inc. (NYSE: BJ) up 2.97%
The sector also drew interest as a result of the General Motors IPO. GM said that it will increase the size of the offering by 30%, which could make it the largest in history.
U.S. consumer prices rose 0.2%, but less food and energy the index was flat. U.S. home construction for October fell to its lowest level in 18 months, and housing starts fell 11.7%. Economists interpreted both reports as encouraging the Fed to continue with its QE2 program.
The 10-year Treasury note fell again, bringing its yield to 2.864%. The euro rose slightly versus the U.S. dollar at $1.3515, up from $1.3489 late on Tuesday.
At the close, the Dow Jones Industrial Average fell 16 points to 11,008, the S&P 500 was flat at 1,179, and the Nasdaq rose 6 points to 2,476. The NYSE traded 954 million shares with advancers over decliners by 1.6-to-1. The Nasdaq crossed 521 million shares with advancers ahead by 1.1-to-1.
Crude oil for December delivery fell $1.90 to $80.44 a barrel. The Energy Select Sector SPDR (NYSE: XLE) rose 25 cents to $61.70. December gold settled down $1.50 at $1,336.90 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) closed at 207.19, up 0.46 points.
What the Markets Are Saying
Yesterday’s pause following the nasty beating the market took Tuesday may have been a welcome relief for the battered bulls, but it doesn’t change the technical outlook. With a powerful thrust through the S&P 500’s 20-day moving average on high volume, notice is given that the near-term trend is down and that the intermediate-term trend is in jeopardy.
After big days down on Nov. 9 and Nov. 12, the latest drubbing has each of the major indices breaking their respective 20-day moving averages. But so far only the Dow Industrials have come close to hitting the 50-day moving average. Yesterday’s intraday low at 10,991 came within just 12 points of it at 10,979. The 50-day for the S&P 500 is at 1,167, and the Nasdaq’s is at 2,430.
Michael Ashbaugh points out that the NYSE has seen two “9-to-1 downdrafts in the past three days.” The term “9-to-1” is used as an expression of extreme selling and means that volume on the downside was more than 9 times greater than volume on the upside.
In fact, Tuesday’s drubbing was even worse than 9-to-1. It produced a ratio of 14-to-1 on the NYSE and 10-to-1 on Nasdaq. This is truly a nasty sign for the bulls, and is usually followed by more days of selling.
GM’s offering may provide a temporary respite for bulls. But if the major indices plow through their respective 50-day moving averages on more high-volume selling days, it’s going to be a long, long winter.
The market weakness is creating some bargains, and one of them is our 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.
