Stocks closed modestly higher Thursday, led by a rally in health care stocks, which advanced 1.3%.
Two of the biggest gainers on the Dow Jones Industrial Average were Johnson & Johnson (JNJ), up 1.5% after announcing the acquisition of hair-products company Vogue International, and UnitedHealth Group Inc (UNH), up 1.1%.
Energy stocks fell 0.1% despite a 0.3% increase in oil to $49.17 a barrel, as OPEC failed to reach an agreement on production. Diamond Offshore Drilling Inc (DO) lost 4% while Dow members Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) slid 0.8% and 0.6%, respectively.
The yield on the 10-year Treasury note fell to 1.81% from 1.85% on Wednesday, and the U.S. dollar rose against the euro.
Gold fell 0.2% to $1,209.80 an ounce. Bill O’Neill, a broker with LOGIC Advisors told The Wall Street Journal the recent losses in gold were due to anticipation of an interest rate increase in June.
Today’s jobs report will be the focus of traders. The consensus expects nonfarm payrolls of 158,000, but some Fed officials have indicated that a much lower number would still be acceptable for a rate hike.
At Thursday’s close, the Dow Jones Industrial Average gained 49 points at 17,839, the S&P 500 rose 6 points to 2,105, the Nasdaq added 19 points at 4,971, and the Russell 2000 was up 8 points at 1,171.
The NYSE Composite’s primary exchange traded 974 million shares with total volume of 3.6 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.9-to-1, and on the Nasdaq, advancers led by 1.6-to-1. Block trades on the NYSE increased to 5,179 compared to 5,082 on Wednesday.
Despite a positive MACD and a generally bullish structure, light buying has not helped the S&P 500 cut through the overhead at 2,105.33. But it closed Thursday just 0.07 points shy of breaking that barrier, so it may get another opportunity today.
Unlike the S&P 500, the small-cap iShares Russell 2000 Index (ETF) (IWM) is still running strong. Like the broader market index, low volume has characterized the run up in IWM and MACD is strong. But in order to make new highs, volume must improve.
Conclusion
I hate to pound one subject, especially in light of the fact that, with the exception of my Trade of the Day column, I have not encouraged readers to participate in the broader rally since March. However, the technicals just don’t support a breakout, so I must call it the way I see it.
In addition to low volume, a head-and-shoulders reversal is still in place on the S&P 500. A close above 2,105.33 would cancel out that potentially bearish formation, and that is why that line is so important for a continuation of the current advance.
Breadth at under 2-to-1 is not encouraging since it indicates reluctance on the part of investors to become bullish.
Nevertheless, there are always good long-term investments with higher-than-average dividends. Check out the Trade of the Day for an example of a good longer-term commitment.
Ironically, “commitment” is the characteristic that is missing from the current advance — i.e., the willingness to invest in some of the best stocks. When that changes, we will see a break to new highs. In the meantime, this is a trader’s market.
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.
