On Wednesday, the S&P 500 jumped to a new high in the last 15 minutes of trading. The rally followed the release of the report from the Federal Reserve’s May 2-3 meeting that indicated a hike in rates in June was possible.
The Dow Jones Industrial Average rose 0.4%, the S&P 500 gained 0.3% and the Nasdaq rose 0.4%. Nine of the S&P 500’s sectors rose with Consumer Staples (+1.95%) and Real Estate (+0.93%) leading. Financials fell 0.1% and energy declined 0.4%.
Tiffany & Co. (NYSE:TIF) lost 8.7% after reporting that comparable-store sales fell 3% vs. Q1 2016, and Advance Auto Parts, Inc. (NYSE:AAP) fell 5.4% following lower-than-expected earnings and revenues. But E I Du Pont De Nemours And Co (NYSE:DD) rose 1.3% as its proposed merger and spin-off plans moved ahead.
Crude oil (WTI) futures fell 0.2% to $51.36 per barrel, breaking a five-day streak of gains. The pause was attributed to skepticism regarding an extension of production cuts beyond June.
At the close, the Dow Jones Industrial Average gained 75 points, closing at 21,012, the S&P 500 rose 6 to close at 2,404, the Nasdaq gained 24 at 6,163, and the Russell 2000 closed at 1,383, gaining 2. The NYSE’s primary exchange traded 797 million shares with total volume of 3.4 billion shares, and the Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.3-to-1, and on the Nasdaq, advancers led by a small margin. Blocks on the NYSE increased slightly over Tuesday’s total of 6,885.
On May 18, I noted “The VIX had its biggest advance since last September, which only lasted for two days. This jump may go for several more but appears limited to bargain-hunting.” Its current decline indicates complacency rather than fear and could last for weeks.
New closing highs are normally a strong indication that the market will continue with more new highs. But not without supportive volume, and breadth at a mere 1.3-to-1 (NYSE), and less on the Nasdaq.
Conclusion: The lethargy exhibited in the VIX and the internal sentiment numbers could be due to a number of external factors (lack of follow-through in crude oil’s price, the threat of more attacks by radical Islamists, etc.); however, what is — is! Or is not, and that is supportive volume. The public and institutions are complacently fearful to make large investment at current high prices.
A new closing high by the S&P 500 following a bullish “W” looks great, but “something is rotten in the state of Denmark” (Shakespeare). Sorry Denmark, it’s not you, but fear of something that is holding back the much-needed block purchases that follow bullish indicators.
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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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