Stocks rallied off the mat on Monday to close with narrow losses for a third straight session, but the 2011 closing high set last Wednesday appears increasingly like the market’s near-term ceiling.
Equities were about as mixed as they can get on Monday, with strength in the tech sector, consumer cyclicals and transportation offset by weakness in financials and utilities.
The Dow Jones Industrial Average slipped 37 points to 11,637, as nearly two-thirds of the index components finished in the red. The S&P 500 posted an even narrower loss, dropping fewer than 2 points to 1270.
Tech stocks, however, posted by broad gains again from semiconductor stocks and by Apple (NASDAQ:AAPL), which tacked on 2% in the wake of widely published reports that the company plans to widen the market of its ubiquitious iPhone with a distribution agreement with Verizon (NYSE:VZ).
The three-day losing streak for large financial names is troublesome for bulls, as the broader market will have difficulty moving higher without that sector helping the charge. The SPDR Financial Select Sector (NYSE:XLF) exchange-traded fund was down just 3 cents to $16.18 on Monday, but has now fallen 2% from an intraday high set last Thursday.
Market participants are now forced to consider the market’s near-term prospects after a session that suggested more hints of consolidation — or worse. The S&P 500, for example, set its lowest intraday high of 2011, which was just 0.3% from the index’s 2010 finish. As it stands now, the market continues to hang onto its 1% gain for the year to date.
For bond bulls, the news was happier. The yield on the 10-year-note fell to 3.3% — its lowest point of 2011 and at a level it hadn’t finished since Dec. 10.
Of course, with a slew of earnings reports on tap for most of the rest of January, this month will go a long way to set the market’s early-year tone.
Judging by the early returns after Monday’s closing bell, the proverbial mixed bag is the early default setting: Aluminum king Alcoa (NYSE:AA) beat the Street’s earnings estimates but missed on revenue, a theme that was seen throughout the second half of last year.
Similarly, educational firm Apollo Group (NASDAQ:APOL) beat analysts’ earnings and revenue estimates, but said new student enrollment was below expectations, perhaps boding ill for future quarters.
The market has now “lost” its past three sessions, but it has managed each day to rally off early-session lows. The tug-of-war between bulls and bears is clearly an active sport.
