Stocks began the week with a lower close on light volume, which was attributed to a downturn in crude oil and last week’s low-volume, cautious buying. Despite a new high for the S&P 500, last week’s volume was the lowest of the year.
The energy sector fell 1.9%, the result of a 2.4% drop in oil to $43.13 a barrel. Barclays attributed the recent slide in oil prices to a summer glut and falling demand, which is growing at less than a third of the year-ago rate.
The worst performers in the Dow Jones Industrial Average were Exxon Mobil Corporation (NYSE:XOM), off 1.9%, and Chevron Corporation (NYSE:CVX), off 2.5%. Other notable decliners in the energy sector included Chesapeake Energy Corporation (NYSE:CHK), down 4.6%, and Devon Energy Corp (NYSE:DVN), down 4.4%.
The Dow Jones Transportation Average lost 0.9% as airline stocks continued a decline that began last week. JetBlue Airways Corporation (NASDAQ:JBLU) fell 1.7% and Southwest Airlines Co (NYSE:LUV) lost 1.2%.
However, technology stocks as a whole held up, helped by a 6% jump in Micron Technology, Inc. (NASDAQ:MU). Retail stocks were also in the black. Nordstrom, Inc. (NYSE:JWN) rose 4.6%, Under Armour Inc (NYSE:UA) gained 1.7%, and Macy’s, Inc. (NYSE:M) rose 3.3%.
At Monday’s close, the Dow Jones Industrial Average fell 78 points to 18,493, the S&P 500 lost 7 points at 2,168, the Nasdaq declined 3 points to 5,098, and the Russell 2000 was down 3 points at 1,210.
The NYSE Composite’s primary exchange traded 775 million shares with total volume of 3 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 1.7-to-1, and on the Nasdaq, decliners led by 1.4-to-1. Block trades on the NYSE rose to 4,356 from 4,148 on Friday.
The Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) has again failed to penetrate the stubborn resistance at $69.50. Monday’s close under the 50-day moving average at $67.47 also challenges the intermediate support line, which is at about $67 and was penetrated by the low of the day. Negative volume is increasing slightly and MACD is slightly negative.
Oil prices impact many sectors of the stock market. Thus, a break in XLE to its next major support — the 200-day moving average at $63.71 — would probably result in an extended consolidation by the major indices.
However, falling oil prices should not have much of an impact on pharmaceuticals or technology stocks, which should continue to outperform. That’s why I have decided to focus on these groups in the Trade of the Day this week (see my latest picks here and here).
Despite sliding crude prices, the major indices are holding within the narrow ranges defined by the tight flags on the Dow, S&P 500 and Nasdaq. Selling pressure is light and the overall picture is bullish, so some of the vast amounts of cash on the sidelines will probably make small commitments, sustaining the market in a holding pattern within these tight ranges until they break on the upside. Earnings have been better than expected, and retail sales surprised analysts by rising 0.6% in June.
The bulls are sluggish but awake. Let’s hope some solid earnings reports will perk them up.
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.