After four days of buying, sellers jumped on the financial group yesterday.
A strong opening resulting from an upgrade of American Express (AXP) and Capital One Financial Corp. (COF) by Barclays was reversed after SunTrust Bank (STI) CEO James Wells said that U.S. banks will see more pain from bad commercial real estate loans, and that the pain could last through 2010.
Banks were hit the worst, with the regional banks down 3.2% and diversified banks off 2.3%. SunTrust fell 3.8% and Huntington Bancshares (HBAN) lost 4.6%.
Energy stocks were strong the entire day, helped by higher crude oil prices, which set new highs for the year. The sector gained 1.3%, with Exxon Mobil (XOM) up 2%, ConocoPhillips (COP) up 2.5% and Chevron (CVX) up 1.5%.
At the close, the Dow Jones Industrial Average (DJI) gained 3 points closing at 9,509, the S&P 500 (SPX) was off less than a point at 1,026, and the Nasdaq (NASD) fell 3 points to 2,018.
Volume on the NYSE totaled 1.2 billion shares with decliners just slightly ahead of advancers. On the Nasdaq, decliners ruled by 7-to-6 and volume totaled 609 million shares.
What the Markets Are Saying
Dow Jones technician Geoffrey Rogow is correct when he says that the success of the current breakout will be determined by the consumer stocks. They hold not only the key to the market, but to the economy, as well, accounting for the lion’s share of GDP.
This week there are several reports that will focus on the consumer. The August consumer confidence numbers will be released today. New home sales will be released on Wednesday, followed by GDP, personal income and consumer spending later in the week.
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Even though the Dow broke to another new high yesterday, the index just barely held above the psychologically important 9,500, and both the S&P 500 and the NYSE Composite registered minor reversals from our in-house Collins-Bollinger Reversal (CBR) indicator. So this week may turn out to be a pause with lower volume again as we head into Labor Day.
The reappointment of Fed Chairman Ben Bernanke will almost surely be greeted warmly by the market. So I’d be surprised if the market doesn’t move higher and perhaps even expands the positive breadth that accompanied last week’s breakout.
But if the broad market fails to greet the Bernanke news with a pop to new highs along with an expansion of buying volume, watch out. That would be a negative response to good news and a signal that a correction is about to occur.
Today’s Trading Landscape
Earnings to be reported include: Applied Signal Technology, Asustek Computer, Bank of Montreal, Bank of Nova Scotia, Big Lots, Borders Group, Burger King Holdings, Chico’s FAS, Corinthian Colleges, Daktronics, Dycom Industries, Hain Celestial Group, International Rectifier Corp., Medtronic, Myriad Genetics, Sanderson Farms and Staples.
Economic reports due: ICSC/Goldman Sachs Chain Store Sales, Redbook, S&P/Case-Shiller Home Price Index, Richmond Fed Survey, Conference Board Consumer Confidence Index (the consensus expects 48), API Oil Industry Report, ABC/Washington Post Consumer Confidence, FHFA House Price Index (the consensus expects 0.4%), and State Street Investor Confidence.
Late news: Bernanke will be reappointed as Fed chairman.
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