Monday began with selling, led by financial stocks, many of which retreated from fresh new highs last week.
The sell-off in the morning was modest and was followed by a mild rally. The rally was accompanied by low volume and thus not enough momentum to completely overcome the morning’s lower prices. At the final bell the Dow Jones Industrial Average fell 0.2%, the S&P 500 lost 0.3%, and the Nasdaq was down 0.4%. The Russell 2000 fell 0.7%.
The selling was primarily centered in stocks that did well last week: J.P. Morgan Chase & Co. (NYSE:JPM) was off 1% yesterday, and Deutsche Bank AG (USA) (NYSE:DB) fell nearly 4% due to an announcement that the bank was seeking to raise $8.5 billion through a sale of stock.
Crude oil fell 0.2%, but the energy sector was the only gainer, up 0.3%, of the eleven sectors in the S&P 500.
Although profit-taking was blamed for the mild decline, there were other outside influences that could have had a negative impact on stocks: North Korea fired four ballistic missiles into the Sea of Japan, President Donald Trump accused President Barack Obama of ordering a wiretap of Trump Tower, and General Motors Company (NYSE:GM) announced the sale of its Opel division.
At the close, the Dow Jones Industrial Average fell 51 points at 20,954, the S&P 500 fell 8, closing at 2,375, the Nasdaq lost 22 points at 5,849, and the Russell 2000 lost 10 to close at 1,384. The NYSE’s primary exchange traded 795 million shares with total volume of 3.2 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 2.3-to-1, and on the Nasdaq, decliners led by 2.4-to-1. Blocks on the NYSE fell to 6,335 from 6,586 on Friday.
After the run-up last week, led by the banks, we expected a period of consolidation. A CBR Sell signal from my proprietary indicator marked the top of the S&P’s bank sector. But volume was low, and yesterday’s selling was halted at the 20-day moving average (green line).
Conclusion: If this is all there is to the “correction,” then we may see a dramatic reversal back to new highs. My hunch, however, based on the outside negative influences mentioned above, is that the banks will lead the major indices to a test of the 50-day moving average (blue line) now at 44.16. The depth of support should hold at that level, and so traders will want to focus on their favorite stocks for a good buying opportunity.
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.
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