Thursday started with what appeared to be a continuation of Wednesday’s selling, but stocks recovered. The S&P 500 closed flat for the day, while the Nasdaq lost 0.5% and the small-cap Russell 2000 fell 0.6%.
The Dow Jones Industrial Average managed to eke out a 0.1% gain despite a 2.4% drop in Apple Inc. (AAPL), the index’s biggest loser.
Outside the Dow, retailers continued to be pressured. Kohl’s Corporation (KSS) fell 9.2% after reporting an 87% decline in income.
Biotech stocks also remained under pressure. The iShares NASDAQ Biotechnology Index (ETF) (IBB) fell 1.7%, led lower by Mylan NV (MYL) and Allergan plc (AGN), down 2.6% and 3%, respectively.
JetBlue Airways Corporation (JBLU) lost 4.7% on a 12.5% drop in revenue per available seat mile in April compared to a year ago. JBLU was the biggest decliner on the Dow Jones Transportation Average, which fell 1.4%.
The U.S. dollar gained slightly against the euro, but fell slightly against the British pound. The Bank of England left interest rates unchanged, and officials stated that leaving the European Union could “materially alter the outlook for output and inflation.” A referendum on the issue will occur on June 23.
Oil hit a six-month high and closed up 1% at $46.70 a barrel. Gold started the day higher but settled down 0.3% at $1,270.30 an ounce following a turbulent session.
At Thursday’s close, the Dow Jones Industrial Average gained 9 points at 17,721, the S&P 500 was unchanged at 2,064, the Nasdaq fell 23 points to 4,737, and the Russell 2000 lost 6 points at 1,109.
The NYSE Composite’s primary exchange traded 948 million shares with total volume of 3.8 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by a small margin, but on the Nasdaq, decliners led by 2.1-to-1. Block trades on the NYSE increased to 5,274 from 5,156 on Wednesday.
The SPDR S&P MidCap 400 ETF (MDY) is holding above its 50-day moving average at $261.80 but has pierced its recovery channel at about $265. Volume is light, but MACD continues a negative trend that began in early April.
The iShares Russell 2000 Index (ETF) (IWM) looks much worse than MDY. Not only has the recovery channel been broken, but sellers smashed through the 200-day moving average at $111.40. The 50-day moving average is under attack and sellers are increasing.
Conclusion
There are few investors willing to take risks at current levels. This is called “low conviction” and is reflected in the higher selling volume in IWM and negative internal indicators (MACD, momentum, etc.).
Even though the most recent signal from our S&P 500 17-month moving average chart was a buy signal, it was the fourth change of opinion in as many months.
The market appears to be topping prior to a “normal” summer adjustment lower of 5% to 8%.
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.
