Major rally takes hold of stocks, although volume remained on the light side. The Dow ($INDU) rose 159.19 points, closing back above the 10K level at 10,117.62. The S&P 500 ($SPX) added 1.61 percent on the session to 1,113.05. The Nasdaq ($COMPQ) saw the largest advance, tacking on 2.17 percent to 1,964.65. Volume picked up from Monday’s anemic session, but remained light. The NYSE traded 1.54 billion shares with the Naz turning over 1.75 billion. Market breadth was extremely positive by a 28-to-6 and 23-to-9 margin on the Big Board and Naz respectively.
Stocks rose today because there wasn’t a lot of negative news holding them down. Oil prices fell off Monday’s highs and this left traders able to focus on the positives in the economy. Earnings were very strong in the first quarter, but stocks have not benefited because of high gas prices and problems in Iraq. It seems traders are coming to grips with the fact interest rates are going to rise, but the bulls still haven’t been able to show much strength until today.
After a nine percent decline Monday, shares of tobacco company Altria (MO) gained nearly four percent today. Both Deutsche Bank and Smith Barney had positive things to say about the stock, telling clients to buy the weakness. Among Dow components, only SBC Communications (SBC) moved lower.
The Naz was able to move above resistance today when it closed above its 200-day moving average. Now traders are looking for the Naz to recapture the 2K level. Volume for the Nasdaq 100 Trust (QQQ) was strong, with nearly 150 million shares trading. With the Naz rising sharply, the Nasdaq Volatility Index ($VXN) fell nearly 10 percent. The VXN now sits at 22.04, just 10 percent from its support level near 20.
Economic news picked up Tuesday, but didn’t have much impact on trading. Chain store sales fell 0.5 percent last week and May consumer confidence remained flat. However, existing home sales rose above expectations, reaching its second highest reading on record. Overall, traders took the opportunity to buy shares today, but we’ll have to see if the strength lasts. Recent strength for stocks has been met with selling, with a number of wild cards present. Lower oil prices eased some selling pressure, but these prices can easily go back up, creating bearish tendencies once again.
Jody Osborne Senior Staff Writer & Options Strategist Optionetics.com ~ Your Options Education Site
Tech sector adds on to Tuesday’s rally, though the broader market closes near the flat line. The Dow ($INDU) finished the day with a loss of 7.73 points to 10,109.89. The S&P 500 ($SPX) was able to close the session in the red, but just by 1.90 points. The Nasdaq ($COMPQ) solidified its moved above its 200-day moving average, rising 11.50 points to 1,976.15, which was also the high for the day. Volume remained was light on the session, with the NYSE trading 1.36 billion shares and the Naz trading just 1.59 billion shares. Market breadth was positive by a 20-to-12 and 18-to-13 margin on the Big Board and Naz respectively.
Wednesday’s lack of selling could be considered bullish considering the gains achieved on Tuesday and the negative news that hit the Street this morning. Terrorism has taken a front seat once again after U.S. counterterrorism officials warned that Al-Qaida is planning an attack on the U.S. this summer. What really is frightening is that there are those that believe terrorists have been able to get biological and chemical agents.
Of course, terrorist concerns do put pressure on oil prices, which have already been reaching new highs. Nonetheless, after fluctuating throughout most the session, oil closed down 44-cents to $40.70 a barrel. The Energy Dept announced this morning that gasoline supplies fell last, while crude oil stocks remained flat. Traders are still trying to figure out what OPEC is going to do after the group pushed back a decision on raising production.
Economic news was disappointing today, with most reports failing to match expectations. The most notable miss came from the durable goods orders report for April. Economists were expecting durable goods orders to fall by 0.8 percent, but the actual drop came in at 2.9 percent. However, March’s figure was revised higher and orders were still strong on a year over year basis.
A 2.29 percent drop in shares of SBC Communications (SBC) hurt the Dow today. SBC was hurt by an earnings estimate cut at UBS. This came on the heels of the renegotiation of a labor contract that has been weighing on the stock. Shares of Verizon (VZ) also struggled today, falling nearly three percent. The company was hurt by news that Comcast (CMCSA) would make a push into areas that Verizon is currently strong in.
Overall, today’s trading was quiet, but bullish in nature. After such a large advance on Tuesday, it seemed likely that negative economic news would push stocks lower, but this didn’t occur. Nonetheless, it is difficult reading into the market’s moves when volume just isn’t there to confirm these moves.
Jody Osborne Senior Staff Writer & Options Strategist Optionetics.com ~ Your Options Education Site
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