Stocks were strong for most of Tuesday, but by 2 p.m., it was clear that without the support of positive economic or corporate news, the market would go no further. So the last two hours were spent taking back about 60 Dow points. At below the breakeven mark, some buying emerged, and it was enough to close the leading averages on the plus side.
Cisco Systems (CSCO) announced a new router that is designed to improve the speed and size of downloaded data, and that created some interest in several telecommunications stocks. This positive news kept the Nasdaq (NASD) in the black, but by the close its big early gains had been erased.
Sprint (S) gained 6.5%, and Verizon (VZ) rose 0.9%. And Apple (AAPL) and Research In Motion (RIMM) also benefitted from the Cisco announcement. (Find out which one is our Trade of the Day.)
The financial sector was the subject of buying following a report that the government is discussing plans to sell its 27% stake in Citigroup (C). Citigroup jumped 7.3%, AIG (AIG) gained 12.6%, Fannie Mae (FNM) rose 5.9%, and Freddie Mac (FRE) gained 7.6%.
The U.S. dollar was weak versus the yen, but strong against the euro.
At the close, the Dow Jones Industrial Average (DJI) gained 12 points to 10,564, the S&P 500 (SPX) rose 2 points to 1,140, and the Nasdaq gained 8 points to 2,341.
Volume on the NYSE totaled 1.1 billion shares with advancers ahead by 7-to-6. On the Nasdaq, 713 million shares changed hands, and advancers led by 15-to-12.
April crude oil fell 38 cents to $81.49, and the Energy Select Sector SPDR (XLE) closed unchanged at $58.06.
Gold for April delivery fell $1.70 to $1,122.30 an ounce, and the PHLX Gold/Silver Sector Index (XAU) closed at 168.22, off almost a point.
What the Markets Are Saying
The Nasdaq rose modestly again yesterday, but even though it lost its early gains, it ended with 14 points between its prior high in January and the close. But yesterday’s gain was again due to news of a new telecommunications product and not earnings.
All of the indices’ internal indicators are now grossly overbought with stochastic and Moving Average Convergence/Divergence (MACD) numbers at levels not seen since early January. And the same can be said of the sentiment indicators.
Now even the most ardent bulls are getting uneasy due to the lack of volume and commitment, and the obvious absence of new money in the mutual fund area.
But the long-term, intermediate-term and short-term trends are all up, so any correction or reversal will likely just take the indices back to their major support zones and not result in a change in trend.
One of the leading sectors is the banks, and they face a major technical resistance area at their January highs.
If both technology and financial stocks can break through the January barriers, the rally could continue for several more days, but, as noted yesterday, the fuel tank (cash) is on low, and the rally is near an end.
Today’s Trading Landscape
Earnings to be reported before the opening include: A.M. Castle, American Eagle, Bon-Ton Stores, Brown-Forman, Carrizo Oil & Gas, Children’s Place, Clayton Williams, Cumberland Pharmaceuticals, Elbit Systems, EMS Technologies, Fushi International Harbin Electric, Hawk Corp., QLT, ReneSola, Speedway Motorsports, U.S. Concrete, and Vail Resorts.
Earnings to be reported after the close include: Asset Acceptance Capital, Ballard Power, Clean Energy Fuels, FuelCell Energy, Gymboree, Hill International, Hot Topic, I.D. Systems, Inter Parfums, Jo-Ann Stores, Men’s Wearhouse, Metabolix, Orthovita, Providence Service Corp., Semtech, Standard Parking, Techtarget and Western Gas Partners.
Economic reports due: MBA purchase applications, wholesale trade, EIA petroleum status report and Treasury budget (the consensus expects -$223 billion).
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- Use Trendlines to Predict the Market’s Next Move
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