On Tuesday, a combination of lower-than-expected earnings and a final fix at under $50 per barrel on WTI crude oil resulted in lower closes for the averages. The Dow Jones Industrials fell 0.3%, the S&P 500 was lower by 0.4% and the Nasdaq fell 0.5%.
Even though some of the big caps such as Procter & Gamble Co (NYSE:PG) and Merck & Co., Inc. (NYSE:MRK) brought in earnings and price gains , losses by 3M Co (NYSE:MMM) and Caterpillar Inc. (NYSE:CAT) overshadowed the positive results.
Much of the negative tone in the overall market resulted from another day of a strong dollar vs. the British pound, which plunged 0.5% vs. the buck.
Apple Inc. (NASDAQ:AAPL) closed higher, but after the closing bell it announced its third consecutive decline in quarterly revenues and profits. It blamed the poor results on falling sales of its iPhone, its premier product.
For the fiscal fourth quarter (Sept. 24), income fell 19%, and earnings came at a small increase vs. analysts’ expectations. But CEO Tim Cook said that the next quarter should show improvements in both revenues and earnings. The stock fell more than 1.5% in after-hours trading.
At the close, the Dow Jones Industrial Average was down 54 points at 18,169; the S&P 500 fell 8 points to 2,143; the Nasdaq lost 26 points, closing at 5,283; and the Russell 2000 closed at 1,216, off 10 points. The NYSE’s primary exchange traded 839 million shares with total volume of 3.7 billion shares, and the Nasdaq crossed a total of 1.6 billion shares. On the Big Board, decliners outpaced advancers by 1.6-to-1, and on the Nasdaq, decliners led by 2.2-to-1. Blocks on the NYSE increased to 5,502 from 5,100 on Monday.
Yesterday selling contracted for the small-caps exchange-traded fund iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) following an upside test of resistance at its 50-day moving average at $123. The major support line is at $120, less than one point from the close, and although I’m still bullish, supported by a MACD indicator arching up and contracting volume from sellers, the overall pattern is looking a bit toppy. If the support at $120 fails to hold, look for a drop to the next major support at the 200-day moving average at $114.
Conclusion: The stock market is like the English weather — “If you don’t like it now, just wait an hour.”
Some selective bullish thoughts from an analyst whom I respect, Jeff Saut of Raymond James, attributes the following to David Letterman (must be an analyst by that name): “Investor cash levels jump toward levels not seen since 9/11”; “Investors‘ bullish sentiment stinks”; “Many investors are pulling out of mutual funds”; “S&P earnings are estimated to grow by 10% y/y and by 19% next year”; “China’s GDP is accelerating”; etc.
AAII sentiment numbers do “stink” and are among the most bearish in a long time: Bullish 23.7%, neutral 38.4%, bearish 37.8%. Historically the bullish averages 38.4% and bearish average is 30.3%; neutral is 31.3%. The public is usually wrong, thus these numbers should be interpreted as bullish for the intermediate-to-long-term.
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.
