Despite posting gains for Q3, the major indices fell again on Tuesday. Like Monday, it was a volatile day with the Dow making another triple-digit intraday move. Also like Monday, the small-cap Russell 2000 led the way lower, falling 1.5%.
On the S&P 500, it was the energy and materials sectors that led the selling, down 1.3% and 1.2%, respectively. Despite Tuesday’s losses, the S&P’s quarterly gain was its seventh in a row. The Nasdaq also ended the third quarter with its seventh straight win — its longest winning streak since eight-plus quarters in 1996.
Crude oil dropped 3.6% and silver was down 2.9%, each putting pressure on the energy and materials group. The rise of the U.S. dollar accounted for much of the decline in oil and precious metals. The PowerShares DB US Dollar Bullish ETF (UUP) rose 3.9% in September and 7.6% in Q3.
The Conference Board’s consumer confidence index fell to 86 in September from a revised 93.4 in August. The Chicago PMI fell to 60.5 in September, while analysts expected a decline to 61.5. And the Case-Shiller 20-city home price index for July rose 8.1% compared with an expected 7.4%.
At Tuesday’s close, the Dow Jones Industrial Average fell 28 points to 17,043, the S&P 500 lost 6 points at 1,972, the Nasdaq fell 12 points to 4,493, and the Russell 2000 lost 16 points at 1,102.
The NYSE traded a total of 3.9 billion shares, and the Nasdaq crossed 2.2 billion. Decliners outpaced advancers on the Big Board by 1.7-to-1, and on the Nasdaq, there were more decliners by a margin of 2.2-to-1.
In September, the premium between the closing price of the S&P 500 and its 17-month moving average (MA) fell to 8.8% from August’s premium of 11.8%. I noted at the end of August that a premium of 11.8% versus July’s 9.3% “indicates that the bull market is very much intact but also could be telling us that the S&P 500 is slightly overpriced and due for a mild correction.” I added, “June’s premium was the highest of the year at 12.5% and led to July’s mild correction.”
In other words, our trusty long-term indicator is telling us not to worry. We may continue to have an intermediate correction, but there is no end to the bull market yet in sight.
On Tuesday, the S&P 500 would have closed on its 50-day moving average at 1,977 had it not been for the last minute of selling, which dropped the index 5 points. In fact, the closing was not even posted for several minutes after 4 p.m. EST, and the same was true of other indices as well. In the same time frame, the Dow industrials fell over 40 points.
Conclusion
I haven’t read anything about the very strange close on the last minute of Q3, but I wonder if it was market players “painting the tape.”
Painting the tape is an illegal market manipulation usually done by institutions in which they try to influence prices by buying or selling amongst themselves to make it appear that there is significant trading activity. This can result in more selling at lower prices by the public, setting stocks up for bargains that the manipulators then buy.
If this was the case, there should be some response from the SEC and the exchanges. I have no direct evidence that this occurred Tuesday, but I think that regulators owe the public an explanation as to the origin of the suspicious block selling in the last minute of trading that resulted in a delayed final tally on the major exchanges.
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.
