The Nasdaq outperformed the senior indices on Friday, notching its fourth closing high of the year. But while both the Dow Jones Industrial Average and S&P 500 slipped on Friday, they closed the week slightly higher.
Last week was characterized by sector rotation. However, given the limited gains in the major indices, it appeared that trading programs were geared to be satisfied with small profits before jumping from one sector to another.
Uncertainty over the Federal Reserve’s intentions to raise rates stands in contrast to easy money policy from the central banks of Japan and Europe.
According to fed funds futures, the likelihood of a rate increase in September is only at 12%, according to CME Group. The probability of a rate increase by December is at 47%.
More than 90% of the companies in the S&P 500 have reported earnings so far for Q2.
J C Penney Company Inc (NYSE:JCP) gained 6.1% on Friday after the company narrowed its quarterly loss and reported a sales increase. Nordstrom, Inc. (NYSE:JWN) gained 8% after reporting better-than-expected earnings.
Oil rose 2.3% to $44.49 a barrel on Friday and was up 6.4% for the week, prompting some traders to say that the bottom was in.
At Friday’s close, the Dow Jones Industrial Average fell 37 points to 18,576, the S&P 500 lost 2 points at 2,184, the Nasdaq gained 5 points at 5,233, and the Russell 2000 was up a point at 1,230.
The NYSE Composite’s primary exchange traded 711 million shares with total volume of 3 billion. The Nasdaq crossed 1.5 billion shares. On the Big Board and Nasdaq, decliners led advancers by a small margin. Block trades on the NYSE fell to 4,280 from 4,738 on Thursday.
For the week, the Dow gained 0.2%, the S&P 500 rose 0.1%, the Nasdaq gained 0.2%, and the Russell 2000 fell 0.1%.
The Nasdaq may have set a marginal new high on Friday, but the charts of the SPDR S&P MidCap 400 ETF (NYSEARCA:MDY) and iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) show a dull market trading in a very limited trading range. Program traders may be taking small profits, but it appears that is all there is to take in a market where volume is contracting.
Yet, despite the narrow trading range, three sectors still offer some bargains:
- Energy: See my Aug. 12 Trade of the Day, Valero Energy Corporation (NYSE:VLO).
- Financials: See my Aug. 10 Trade of the Day, American International Group Inc (NYSE:AIG).
- Retail: See the Aug. 15 Trade of the Day, Foot Locker, Inc. (NYSE:FL).
These are all examples of stocks with solid technical and fundamental reasons to buy. But patience is needed in a market that isn’t attracting buyers or sellers. Just never sell a slow 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.