There were no surprises from the Fed meeting yesterday, and that met the expectations of most investors. Just after the announcement of no change in rates, the Dow Jones Industrial Average (DJI) was up more than 150 points. But the bottom fell out as selling in insurers and technology stocks took away most of the gain in the last hour of trading.
AIG (AIG) fell 7.7%, Genworth Financial (GNW) was down 7.4%, and Hartford Financial Services Group (HIG) fell 5.3%. All plunged for no apparent reason, but the sell-off had an impact on the Dow, which quickly shed more than 120 points.
Even though the results of the FOMC meeting were expected, there is still concern over future economic growth and the slide in the U.S. dollar, so investors sold stocks and bonds in order to buy gold and other hedges against a further dollar decline.
At the close, the Dow was up 30 points to 9,802, the S&P 500 (SPX) gained a point, closing at 1,047, and the Nasdaq (NASD) fell 2 points to 2,056.
The NYSE traded 1.3 billion shares with advancers just barely ahead of decliners. On the Nasdaq, 727 million shares were exchanged with almost the same, slightly lower breadth as the NYSE.
December crude oil rose 80 cents to $80.40 a barrel, and the Energy Select Sector SPDR (XLE) fell 5 cents to $56.27.
Gold for December delivery rose to an all-time high of $1,096.50 before closing at $1,087.30 an ounce, up $2.40. The PHLX Gold/Silver Index (XAU) rose $1.33 to $169.67. The metal moved high and gained momentum a day after the Bank of India bought 200 metric tons of gold from the International Monetary Fund.
What the Markets Are Saying
Despite the interest in the Fed’s pronouncements and the lack of any policy changes, which is usually greeted positively by the market, stocks sold off in the final hour of trading. This illustrates the fact that it is becoming more difficult for the market to move higher even under conditions that are normally considered favorable.
Nonetheless, our internal indicators are now telling us that, at this level, stocks are still a good value.
Both the Dow and the S&P 500 have held above the nearest chart support and their momentum, Relative Strength Index (RSI) and stochastic indicators are flashing either “very oversold” or “buy,” while the CBOE Volatility Index (VIX) has fallen from Friday’s high, telling us that the pace of trading will probably slow down.
As pointed out several weeks ago, signs of buyer fatigue have been setting in, and so it is taking much longer for the indices to pop to new highs than earlier in the year.
Simply put, in April to June, stocks were so undervalued following the March capitulation that new highs were occurring almost daily. Now it may take weeks to plod back to the top and launch another attack on the big round numbers of Dow 10,000 and S&P 1,100.
Taking time to move ahead is not bad, just tedious, and it could work in the bulls’ favor. A huge glut of liquid cash is still sitting in money market funds that will eventually be put to work, since one of the rules of economics is that money always seeks the best return. And as long as the current support levels don’t give way, the “best return” favors common stocks.
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Today’s Trading Landscape
Earnings to be reported include: Abiomed, Abovenet, Abraxis BioScience, Accelrys, ACI Worldwide, Air Methods, Alaska Communications Systems Group, Alexandria Real Estate, Allied Capital Corp., Allied World Assurance Co Holdings Ltd., American Public Education, Apollo Investment Corp., Arena Resources, Ares Capital Corp., Artesian Resources, Athersys, Atlas Energy, Aurizon Mines Ltd.
Biovail Corp., Blackrock Kelso Capital Corp., Blue Nile, Boston Beer Co., Brink’s Home Security Holdings
CAI International, California Pizza Kitchen, Cardinal Health, CareFusion, CBS Corp., CenturyTel, Choice Hotels International, Cigna Corp., Citizens, Coeur d’Alene Mines, Coherent, Concho Resources, Consolidated Communications, Continental Resources, Cornell Companies, CrediCorp., CVS Caremark Corp.
DCP Midstream Partners LP, Delek US Holdings, Denbury Resources, Deutsche Telekom, DG FastChannel, Dr. Pepper Snapple Group, Dynegy
Eastern Insurance, Eclipsys, Einstein Noah Restaurant Group, Emergent Biosolutions, EMS Technologies, EOG Resources, Exterran Holdings, EZCorp.
FBL Financial Group, Frontier Oil, Fuel Systems Solutions, Fuel Tech, Furniture Brands
Gafisa S.A., Genesis Energy LP, Genesis Lease Ltd., Genoptix, Gerdau S.A., GP Strategies, Gramercy Capital Corp., Gulfport Energy Corp.
H.H. Gregg Appliances, Hain Celestial Group, Hansen Natural, Harvest Natural Resources, Hercules Technology Growth Capital, Holly, Home Diagnostics, Home Properties, Hornbeck Offshore Services, Horsehead Holding Corp., HRPT Properties Trust, Huron Consulting Group
i2 Technologies, ICF International, IMAX Corp., Infinity Property and Casualty Corp., InterNAP Network Services Corp., International Game Technology, International Rectifier, Intrepid Potash, inVentiv Health, Invesco Mortgage Capital, iPass
JDSU
Kaman Corp., Kid Brands, King Pharmaceuticals, Koppers Holdings
Lakes Entertainment, Leap Wireless International, Lexington Realty Trust, Lifetime Brands, Lincoln Educational Services, LivePerson, LSB Industries, LTC Properties
Macerich, Mac-Gray Corp., Macquarie Infrastructure Co., Macrovision, Magna International, Manulife Financial Corp., MarineMax, Mariner Energy, Markel Corp., McGrath RentCorp., Medical Properties Trust, MetaliCo., MetroPCS Communications, MF Global, Mid-America Apartment Communities, Millipore Corp., Momenta Pharmaceuticals, Moog, Morton’s Restaurant Group, MWI Veterinary Supply
National Fuel Gas Co., Natural Gas Services Group, NEI, Net 1UEPS Technologies, NGP Capital Resources Co., Nobel Learning Communities, NorthStar Realty Finance Corp., Numerex Corp., Nvidia Corp.
Obagi Medical Products, Ocwen Financial, OM Group, Omnicare, Orbitz Worldwide, Orion Marine Group
Penn West Energy Trust, Petrohawk Energy Corp., Pioneer Drilling Co., Plains Exploration, Playboy Enterprises, PowerSecure International, Prestige Brands Holdings, Princeton Review, PROS Holdings, Public Storage
Red Robin Gourmet Burgers, Republic Airways Holdings, ResCare, ResMed, Rosetta Stone, Royal Gold
S1 Corp., SandRidge Energy, Sapient, Sara Lee, Saul Centers, Scripps Networks Interactive, Semitool, Sirius Satellite Radio, SkyWest, Skyworks, Sonic Solutions, Sonus Networks, Sotheby’s, South Jersey Industries, Southern Union Co., Spectra Energy, Spirit AeroSystems Holdings, Stantec, Starbucks, Steinway Musical Instruments, Sun Life Financial, SunoCo., SXC Health Solutions, Symmetry Medical
Telephone Data, Tenaris S.A., Teradata, The DirecTV Group, The E.W. Scripps Co., The Knot, The Nasdaq OMX Group, The Navigators Group, The Scotts Miracle-Gro Co., Theragenics Corp., Thomson Reuters Corp., Time Warner Cable, Tower Group, Toyota Motor Corp., Transglobe Energy Corp., Tutor Perini Corp.
U.S. Physical Therapy, Universal Electronics, UQM Technologies, US Concrete, U-Store-It Trust
Validus Holdings Ltd., VeriSign, Verso Paper, ViaSat, Viewpoint Financial Group
W&T Offshore, W.P. Carey & Co LLC, Watson Wyatt Worldwide, Wendy’s/Arby’s Group, Winthrop Realty Trust, World Wrestling Entertainment
ZymoGenetics
Economic reports due: chain store sales, jobless claims (the consensus expects 523,000), productivity and costs (the consensus expects 6.3% for non-farm productivity and -3.9% for unit labor costs), EIA natural gas report, Fed balance sheet and money supply.
Late news: Cardinal Health (CAH) reported Q1 EPS of 54 cents versus a 43-cent estimate.
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