Wall Street could hardly be quieter, with large-cap stocks in their narrowest trading range since the 1960s as the CBOE Volatility Index (VIX) continues in its longest consecutive streak below 11.
The national psyche is obsessed with the cavalcade of political news out of Washington; largely ignoring market-specific events like chatter of an OPEC-Russia supply freeze extension of a bit of softness in the housing market. Despite this, Big Tech stocks remain well bid with a narrow group of all-stars pushing the Nasdaq to a new high.
In the end, the Dow Jones Industrial Average lost a fraction, the S&P 500 lost 0.1%, the Nasdaq Composite gained 0.3% and the Russell 2000 gained 0.1%. Treasury bonds were stronger, the dollar weakened again, gold gained 0.5% and crude oil lost 0.4% as the bounce from the supply freeze extension news from earlier in the week faded on realization it will only steepen OPEC’s market share loss to U.S. shale producers.
Breadth was negative, with 1.2 decliner for every advancing issue on the NYSE. Volume was light, at 90% of the 30-day average. Technology led the way with a 0.5% gain, helped by a 1.4% rise in Microsoft Corporation (NASDAQ:MFST) and a 1.4% rise in International Business Machines, Corp. (NYSE:IBM). Advanced Micro Devices, Inc. (NASDAQ:AMD) surged 11.7% on reports Intel Corporation (NASDAQ:INTC) had licensed graphics technology from the company upon the expiration of its agreement with Nvidia Corporation (NASDAQ:NVDA). Amazon.com, Inc. (NASDAQ:AMZN) gained another 0.9%. And Twitter Inc (NYSE:TWTR) jumped 1.4% on word co-founder Biz Stone was returning to the company.
Utilities were the laggards, down 0.8%. Dick’s Sporting Goods Inc (NYSE:DKS) lost 13.7%, amid ongoing carnage in the retail sector, after reporting weaker-than-expected same-store sales growth of 2.4%. TJX Companies Inc (NYSE:TJX) fell 4.1% on soft results as well. And Staples, Inc. (NASDAQ:SPLS) lost 3.5% on a revenue miss. Brick and mortar is under siege.
On the economic front, April housing starts fell 2.6% month-over-month on a drag from multi-family units on a shift among the young demographic into buying, resulting in some rental oversupply. Industrial production was stronger than expected, however, rising 1% in April for the largest gain since February 2014.
The weakness in the dollar is notable, with the greenback reversing its post-election rally on a number of headwinds, including doubts about the implementation of President Trump’s pro-growth legislative agenda, uneven economic data, and investor flows out of U.S. assets and into foreign stocks (both emerging market and Europe).
Bespoke Investment Group notes that the Eurozone Economic Surprise Index is higher than 96% of all readings over the last five years while the U.S. Economic Surprise Index is lower than 84% of all reading over the same period. Some softness in recent inflation data is also raising the odds the Federal Reserve slows its rate hike pace this year.
Despite the on-the-surface tranquility, a narrowing of market breadth has created some compelling short-side opportunities. Retail is obvious.
But media stocks are getting hit as well, with Disney (DIS) melting lower on frustration with its ESPN business as well as reports a hacked copy of its new and unreleased Pirates of the Caribbean movie is being held for ransom. A loss of 1.1% today boosted the May $114 puts recommended to Edge Pro subscribers to a 190% gain.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.