Stocks lose ground Tuesday, though the month of May shows strong gains. The Dow ($INDU) gave up 75.07 points to close at 10,467.48. The S&P 500 ($SPX) fell 7.28 points to finish the session at 1,191.50. The Nasdaq ($COMPQ) outperformed the broader market, losing just 0.36 percent to 2,068.22. Volume was moderate at best with the NYSE trading 1.48 billion shares and the Naz trading 1.63 billion shares. Market breadth was flat on the Big Board and negative by a 14-to-16 margin on the Naz.
Economic news was mixed Tuesday with consumer confidence rising and manufacturing activity in the Chicago area falling. The Conference Board stated that confidence in May rose to 102.2 from 97.5 in April. This ended a three month losing streak and was much stronger than expected. However, other sentiment reports have not been so positive, including the University of Michigan report, so we'll have to see how things fare in the months to come.
The Chicago PMI fell to a two year low in May at a level of 54.1 percent. This was down sharply from the 65.6 percent reading in April and was lower than expectations for a reading near 61 percent. Nonetheless, any reading above 50 percent shows expansion, but it is obvious that activity has slowed in the past few months. The drop in employment in the Chicago PMI is also creating some concern about how strong the employment report will be Friday.
Oil prices are one reason why sentiment remains low. On Tuesday, oil prices rose 12-cents to close at $51.97 a barrel. Last week, crude prices gained 6.6 percent on what most analysts blamed on short covering. Of course, last week's surprise drop in crude inventory levels was a concern. This means that this week's data could also create movement in oil prices.
The Philly Semiconductor Index ($SOX) fell 0.34 percent on the session to 428.95. Tuesday also saw the end of a 13-session winning streak for chip giant Intel (INTC). However, the sector did get good news from chip equipment maker Novellus (NVLS). The company raised its financial guidance due to strong demand out of Japan. As a result, NVLS shares gained nearly three percent on the session.
Overall, profit taking was part of Tuesday's session, but it isn't something the bulls are too concerned with. This week's trading will be based on economic news and the bulls feel that this will be positive. If it isn't, the bears are looking for support to be broken on the major market indices.
Jody Osborne Senior Staff Writer & Options Strategist Optionetics.com ~ Your Options Education Site
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