On Monday, a late-day explosion of interest in oil stocks sent the S&P 500 to a gain of 1.3%. But it was a choppy session with relatively low volume considering the high volatility.
Crude futures rose 2.8%, settling at $49.57 a barrel, and the energy sector led the market with a gain of 3.1%. Exxon Mobil Corporation (NYSE:XOM) topped expectations for Q4 profits and rose 2.5%. Chevron Corporation (NYSE:CVX) gained 3.4%.
Stocks started the day on a low note following a report by the Institute of Supply Management showing that manufacturing fell by more than expected in January to its lowest level in a year. Production growth decelerated in January. And construction spending rose 0.4% in December but also missed expectations.
Foreign capital sent the price of the U.S. 10-year Treasury note higher, and the yield fell to 1.67% from 1.68% on Friday. Gold futures for April delivery fell 0.2% to $1,276.90 an ounce. The U.S. dollar fell versus the euro, which was up 0.6% at $1.1346.
At Monday’s close, the Dow Jones Industrial Average rose 196 points to 17,361, the S&P 500 gained 26 points at 2,021, the Nasdaq gained 41 points at 4,677, and the Russell 2000 added 10 points at 1,176.
The NYSE’s primary market traded 910 million shares with total volume of 3.9 billion, and the Nasdaq crossed 2 billion shares. On the Big Board, advancers outpaced decliners by 2.7-to-1, and on the Nasdaq, advancers were ahead by 1.8-to-1.
Our readers know that I prefer not to make predictions on chart formations before a solid confirmation occurs. However, on Monday, a prominent technician offered the opinion that a head-and-shoulders top may be forming on the S&P 500 with a neckline at 1,990.
A break of 1,990 on a close would certainly confirm that the formation had been triggered. However, Monday’s reversal up from an intraday low of 1,981, triggering a Collins-Bollinger Reversal (CBR) buy signal, was a bullish event.
Like the S&P 500, the Dow industrials, Nasdaq and Russell 2000 also performed intraday reversals. The catalyst for this unusual event was heavy-volume purchases of energy stocks.
A reversal in Friday’s crude oil futures contract, which closed with a gain of more than 8%, could be the final act of a downtrend in oil that began in July. If a bottom endures, then the 200-day moving averages on the key indices will hold and the 50-day moving average should give way to heavy buying.
It is much too early to call a bottom to the recent decline, but the tape action of the past two days is the most encouraging we’ve seen this year.
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.