On Tuesday, financial stocks rose, but energy defensive issues with high dividends fell. This left the S&P 500 unchanged and the Dow Jones Industrial Average down 0.2%. But the Nasdaq gained 0.4% for another new high — the sixth consecutive gain since Dec. 30.
The Nasdaq’s gain was helped by the healthcare sector and the biotechnology stocks, as illustrated by an 0.8% gain in the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB). But while the Nasdaq gained, the Dow Industrials lost ground after rising to within 50 points of the 20,000 level. Even though the 500 ended flat, the financial sector gained 0.4%, and industrials rose 0.3%.
One disappointing sector — energy — fell 2.2% on Tuesday, led lower by a decline in the price of crude oil. WTI fell 2.2% to $50.83 per barrel. The two big-cap energy giants, Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), each fell. And adding to the pressure on the overall markets, the dividend-heavy Dow Jones Utility Average fell 0.3%, testing its key 50-day moving average (see chart below).
Gold rose to a six-week high, closing at $1,185.50 per ounce. Its advance was described by the head of precious metals of the brokerage firm Marex Spectron, as reported by The Wall Street Journal, a result of buying by the Chinese in advance of their Lunar New Year (Jan. 28).
On the close, the Dow Jones Industrial Average fell 32 points at 19,856, the S&P 500 was unchanged at 2,269, the Nasdaq gained 20 at 5,552, and the Russell 2000 closed at 1,371 for a gain of 13 points. The NYSE’s primary exchange traded 1.2 billion shares with total volume of 3.6 billion shares. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 1.8-to-1, while on the Nasdaq, advancers led by 1.9-to-1. Blocks on the NYSE increased to 6,624 from 5,870 on Monday.
Following its July high at 724, the Dow Jones Utility Average has been in a bear market, four times failing to penetrate its bearish resistance line. Yesterday it retreated again following a close below the 20-day moving average (green line) on Monday, and a slight penetration of its 50-day moving average at 648.51 yesterday.
Following a rally from the November low, it formed a triangle, and its price line is rapidly approaching the apex of the triangle.
Conclusion: Despite the inability of the Dow industrials to close above the 20,000 line, we should gain confidence from the “risk off” message delivered by the Dow utilities. This high-yield defensive index has repeatedly rejected breaking to a bullish stance. And with the small-caps leading, the onus is still on the bears to change the overall trend. The cyclical bull market is in force, and barring any unusual circumstance the DJIA will shortly break the psychological barrier that has hampered its further advance.
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.