A tepid recovery followed Monday’s massive sell-off, which was caused by a report indicating an economic slowdown in China. Stocks traded in a narrow range Tuesday, indicating caution on the part of investors.
The S&P 500 moved within an 18-point range, closing 0.2% higher. The Dow Jones Industrial Average was up 0.1%, and the Nasdaq fell 0.2%.
Following an announcement by President Obama that he would initiate tighter gun controls, Smith & Wesson Holding Corp (SWHC) soared 11.1% and Sturm, Ruger & Company (RGR) jumped 6.8%.
Wal-Mart Stores, Inc. (WMT), the Dow’s worst performer in 2015, led the blue-chip index higher Tuesday, up 2.4%.
Apple Inc. (AAPL) fell 2.5% following a report that claimed the company will reduce iPhone 6s and 6s Plus production by 30% in Q1.
China’s central bank injected $19.9 billion in short-term funds into the country’s financial system. And Chinese regulators hinted the six-month ban on selling by large stakeholders set to expire on Friday could be extended.
WTI crude oil fell 2.1% to $35.97 a barrel on concerns over weak demand. The 10-year Treasury note ended unchanged at 2.25%. And the euro closed down 0.7% against the U.S. dollar at $1.0750.
At Tuesday’s close, the Dow Jones Industrial Average rose 10 points to 17,159, the S&P 500 gained 4 points at 2,017, the Nasdaq fell 12 points to 4,891, and the Russell 2000 recovered 2 points at 1,110.
The NYSE Composite’s primary exchange traded 864 million shares with total volume of 3.7 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 1.4-to-1, and on the Nasdaq, advancers led by 1.1-to-1. Block trades on the NYSE declined to 4,618 from Monday’s total of 5,302.
I have been bullish on financial stocks, concluding that this sector could lead us to a recovery. But the chart of Financial Select Sector SPDR ETF (XLF) forces a change of opinion.
XLF — along with individual stocks that comprise the fund — has dropped through its 50-day and 200-day moving averages on very high volume. This creates a chart with lower highs and lower lows. And Tuesday’s weak attempt at a recovery with below-average volume was not enough to turn the pattern bullish.
This key index, made up of financial companies with strong government support, has failed to recover. Thus, my buy recommendations in the sector should be sold at their current price or on a rally.
Conclusion
The fear over China’s inept handling of its markets illustrates the communist country’s difficulties adapting to free markets. It appears China’s woes may replace Greece and the European Union’s with more serious problems, which could lead to more volatility in U.S. markets.
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.
