On Monday, it appeared everything was working against the stock market: lower oil prices, a sell-off in bank stocks and small caps, and the break of several key technical support levels.
The Dow Jones Industrial Average fell 1.3%, the S&P 500 and Nasdaq each lost 1.6%, and the Russell 2000 dropped 2.3%.
Oil prices plummeted 5.7% to $30.34 a barrel, putting last week’s attempt at bottom-making under attack. Energy was the worst-performing sector of the day, falling 4.7%.
Transportation stocks slid 1.9%, led lower by Kansas City Southern (KSU), CSX Corporation (CSX) and Union Pacific Corporation (UNP).
According to FactSet, 135 companies in the S&P 500 are scheduled to report earnings this week. This could be partially responsible for investors’ nervousness.
However, better-than-expected Q4 results from McDonald’s Corporation (MCD) should have eased that anxiety somewhat. The fast food chain delivered the best U.S. sales in almost four years and saw a 5% increase in global same-store sales.
Gold was up 0.8% to $1,106.20 an ounce. The yield on the 10-year Treasury note fell to 2.03% from 2.07% on Friday.
At Monday’s close, the Dow Jones Industrial Average was down 208 points to 15,885, the S&P 500 fell 30 points at 1,877, the Nasdaq lost 73 points at 4,518, and the Russell 2000 was down 23 points at 997.
The NYSE Composite’s primary exchange traded over 1 billion shares with total volume of 4.2 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 5.4-to-1, and on the Nasdaq, decliners led by 2.9-to-1. Block trades declined to 5,567 from 6,730 on Friday.
The Dow Jones Industrial Average and S&P 500 have similar patterns: falling volume on sales, no new closing low under the August lows, and penetration of important support lines (Dow 16,000 and S&P 1,885).
Conclusion
Breadth on Friday was on the upside with advancing volume over declining volume by 5-to-1 on the NYSE and 6-to-1 on the Nasdaq. The market’s stats are very similar to last August’s makeup. Even the Nasdaq has yet to close below its Aug. 25 low of 4,506.
We will wait for a new closing low in the Dow (below the August closing low of 15,666) before declaring a Dow Theory bear market. It’s apparent the bull is tired, but we are dealing with a very sleepy bear. It’s still anyone’s guess which will be revived first.
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.
