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Wed, February 8 at 8:00PM ET
 
 
 
 

Investors Getting Their Priorities Straight

Stocks reversed field Tuesday as an afternoon sell-off erased a major portion of Monday’s gains and the Dow industrials’ entire 102-point morning jump. The losses were attributed to caution ahead of Q1 earnings that traditionally begin today with Alcoa Inc (NYSE:AA) set to report after the close.

Most analysts expect first-quarter results to decline due to the negative impact of a strong U.S. dollar on multinational companies and weaker oil prices on energy companies. According to FactSet, S&P 500 companies’ earnings are expected to fall 4.9% from a year ago.

Of the 10 sectors of the S&P 500, only two closed on the plus side. Health care gained 0.2%, and energy rose 0.1% as crude oil rallied 3.5% to $53.89 a barrel. The utility sector was the weakest, down 1.2%, followed by consumer discretionary, off 0.6%. iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB) fell 1.8%.

Gold dropped due to a stronger U.S. dollar. The June contract closed at $1,210.60, down 0.7%. The yield on the 10-year Treasury note fell to 1.89%, down from 1.90% on Monday, as bond prices rose. The euro fell 1% to $1.0810.

At Tuesday’s close, the Dow Jones Industrial Average was off 5 points at 17,875, the S&P 500 fell 4 points to 2,076, the Nasdaq lost 7 points at 4,910, and the Russell 2000 dropped 7 points to 1,253.

The NYSE’s primary market traded 661 million shares — the lowest volume since early January — with total volume of 3 billion shares. The Nasdaq crossed 1.6 billion shares. On the Big Board, decliners outpaced advancers by 1.2-to-1, and on the Nasdaq, decliners were ahead by 1.1-to-1.

S&P 500 Chart
Click to Enlarge

In Monday’s trade, we viewed the first half of a short-term rounding top in the S&P 500. Tuesday was not quite as wild. However, the 14-point swing from a high at 2,090 in the morning to a close at 2,076 does make one’s heart skip a beat, especially if he or she is long volatile instruments like put or call options or leveraged ETFs.

 

S&P 500 Chart
Click to Enlarge

Chart Key

Viewed on a daily chart rather than the five-minute chart above, it appears that very little has occurred since Thursday. Yet, support at the 50-day moving average at 2,074 is crucial to maintaining the resistance zone of 2,064 to 2,094. Below that is minor support at 2,048, and then the 200-day moving average at 2,015.

Conclusion

The market finally appears to be placing weight on Q1 earnings. After being tossed about by Fedspeak, investors don’t seem confident that the top U.S. companies will make the grade — and our charts don’t give us a clue either.

Josh Levine, editor of ChangeWave Investing, referred to a comment by leading economist Robert Shiller. This Nobel laureate refers to the volatile, zero-interest-rate market as “a great enigma.” With stock prices steady but lower corporate earnings expected and hints from the Fed of an interest rate increase, Shiller is perplexed. Is it any wonder that the average investor is as well?

We await the Q1 scorecard for guidance.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2015/04/daily-market-outlook-investors-getting-their-priorities-straight/.

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