U.S. equities finished mixed on Tuesday, hitting fresh all-time highs early in the session before some selling pressure hit the tape and prices drifted lower. There is no major catalysts in play, just a continuation of recent themes: Vague positive feelings about President Trump’s plans, relatively strong quarterly results and a comfortable impression that the Federal Reserve isn’t in a hurry to hike rates again.
Yet the nervousness that’s been in place since the post-election uptrend more or less stalled in early December remains. In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 gained a fraction, the Nasdaq Composite wafted up 19 basis points and the Russell 2000 lost 0.4%. Treasury bonds were mixed, the dollar was higher, gold gained 0.3% and oil was weaker ahead of inventory data down 1.6%.
API data after the close was very weak, featuring the second biggest crude inventory build in U.S. history. That lifted the ProShares Ultra Short Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers to a gain of 3.3%.
Consumer staples led the way with a 0.8% gain while energy and materials were the laggards, down 1.4% and 0.8%, respectively. General Motors Company (NYSE:GM) fell 4.7% after reporting a fourth-quarter earnings beat helped by a lower tax rate. Investors focused on higher corporate costs.
After the close, Walt Disney Co (NYSE:DIS) reported mixed results with earnings of $1.55 per share beating estimates of $1.48, but revenues of $14.8 billion missed the $15.3 billion analysts were expecting. ESPN subscriptions remained a sore spot, with network revenue down 2% from last year. Its movie studio and products group also posted weak results — as the Frozen phenomena fades along with Star Wars hype — posting revenue declines of 7% and 23%, respectively.
Backing up, stocks continue to look vulnerable here. Breadth is uneven, with a number of basic materials, energy, and financial stocks moving lower. There are rumblings of trouble out of Europe ahead of elections. And China’s debt markets remain vulnerable amid currency and fixed-income volatility along with word overnight that foreign exchange reserves dropped below $3 trillion for the first time since 2011 (amid efforts to stabilize the yuan).
Most importantly, the U.S. dollar is breaking higher again, ending a three-month pullback, which in turn is putting pressure on crude oil that is already being hit with headwinds from increasing U.S. shale activity and doubts about the enforcement of that OPEC output freeze agreement, but from bearish inventory data as well.
Just look at what’s happening with Chevron Corporation (NYSE:CVX) as shares test critical support from the late January low. Investors were disappointed with the top- and bottom-line miss reported on Jan. 27. Despite a 7.7% rise in revenues and aggressive expense cutting, profitability still came in soft. Edge Pro subscribers are holding a position in the Feb $110 CVX puts.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
