On Monday stocks were hit with a round of hard selling after International Business Machines (IBM) and United Technologies (UTX) reported weaker-than-expected second-quarter reports.
IBM’s stock fell 5.9% after reporting a profit decline of 16.6% and a revenue decline of 13.5%. The sales decline was the 13th consecutive quarterly sales slump. United Technologies reported that sales were off 5% in the June quarter, and it lowered its earnings guidance for the year, and the stock fell 7.1%. The two stocks dropped enough to account for 120 points of the Dow Jones Industrial Average’s decline of 181 points.
Verizon Communications’ (VZ) revenue also fell for Q2 as subscriber growth slowed. The shares fell 2.3%. After the close, Apple (AAPL) posted that it earned $1.85 in its fiscal third quarter, beating estimates by 4 cents. It also reported a slight increase in sales, but the big tech company also said that Q4 revenues will probably disappoint investors, and the stock fell over 7% in after-market trading. The technology sector fell 0.5%.
Energy stocks had a slight recovery, up 0.1%, while crude oil rose 0.9% to $50.87 per barrel. Gold futures fell 0.3% to $1,103.40 per ounce, and Treasury prices rose and pushed the yield on the benchmark 10-year note to 2.342% from 2.372% on Monday’s close.
At the close, the Dow Jones Industrial Average fell 181 points to finish at 17,919, the S&P 500 fell 9 points, closing at 2,119, Nasdaq lost 11 at 5,208, and the Russell 2000 fell 6 points to 1,255. The New York Stock Exchange’s primary market traded 781 million shares with total volume of 3.3 billion shares, and the Nasdaq crossed 1.7 billion shares. On the Big Board, decliners outpaced advancers by 1.5-to-1, and on the Nasdaq, decliners led by 1.4-to-1.
Triple tops are hard to overcome, and we see three very clear highs on the S&P 500 at the all-time high at 2,135 made in early May, the June high at 2,130 and the July high at 2,133. First support is at 2,120 with the next support at the 50-day moving average at 2,102 and then the trendline at about 2,095. The reversal cluster, which defined two CBR Buys that bracketed the 200-day moving average at 2,061, are the most critical features of the chart in that a violation there might indicate a game-changer.
The SPDR S&P Midcap 400 turned from its 50-day moving average at 277 with gusto, with a closing price yesterday near the low of the day. This indicates that there were sellers on the close that will most likely be active at this morning’s opening. But June’s low at the reversal (CBR) at 269 and the 200-day moving average just under it might serve as a critical inflection point. Traders should mark this point on their work sheets since it also connects to the December 2014 high.
Conclusion
The stock market has taken an ominous turn, which within the next several sessions could define a new and lower trading zone. That zone could hang around for the remainder of the summer and even early fall. As noted above, triple tops are not easily overcome. The CBOE Volatility Index (not shown) slipped another 3 points, taking it to the lowest level since December 2014 — just before a decline that lasted for two months and defined a trading range over 100 S&P points.
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.
