Disappointing Economic Reports Sting the Stock Market

April’s ADP Employment Report and the March Construction Spending Report headlined the bad news that stung the stock market on Wednesday.

Wednesday’s batch of downbeat economic reports caused the stock market to retreat after the S&P 500 (NYSEARCA:SPY) reached record-high closing levels on Monday and Tuesday.  The ADP National Employment Report disclosed that only 119,000 private sector payroll jobs were added in April, despite expectations for an increase of 155,000 payroll jobs. The U.S. Department of Commerce’s Census Bureau reported that construction spending during March declined 1.7 percent below the revised February estimate, despite expectations of an increase of 0.6 percent.

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The Dow Jones Industrial Average (NYSEARCA:DIA) sank 138 points to hit 14,700 for a 0.94-percent drop, while the S&P 500 fell 0.93 percent to close at 1,582. The Nasdaq 100 (NASDAQ:QQQ) declined 0.49 percent to 2,873. The Russell 2000 (NYSEARCA:IWM) took a 2.45-percent nosedive to end the day at 924.

In other major markets, oil (NYSEARCA:USO) sank 2.32 percent to close at $32.39. On London’s ICE Futures Europe Exchange, June futures for Brent crude oil  declined by $2.58, or 2.52 percent, to $99.79/bbl. (NYSEARCA:BNO, NYSEARCA:USO). June gold futures (NYSEARCA:GLD) dropped by $16.40, or 1.11 percent, to $1,455.70 per ounce.

Transports were in reverse on Wednesday, with the Dow Jones Transportation Index (NYSEARCA:IYT) falling 2.29 percent.

Many of the European stock exchanges were closed on Wednesday due to the May Day holiday (NYSEARCA:VGK). The Euro STOXX 50 Index finished with a 0.01-percent dip to 2,711 — staying above its 50-day moving average of 2,651. After breaking above its overhead resistance level of 2,700 on January 21, the STOXX 50 is again testing resistance at that level, which has been a barrier since the beginning of the year.

In Japan, stock prices fell as the yen strengthened to 97.06 per dollar. A stronger yen results in less-competitive prices for Japanese exports in foreign markets (NYSEARCA:FXY). The Nikkei 225 Stock Average declined 0.44 percent to 13,799 (NYSEARCA:EWJ). In China, both the Shanghai Stock Exchange (NYSEARCA:FXI) and the Hong Kong Stock Exchange (NYSEARCA:EWH) were closed for May Day.

Technical indicators reveal that the S&P 500 remains above its 50-day moving average of 1,554 after closing at 1,582 — motivating bears to suspect that we are watching the formation of a double-top, which would signal a decline. Its Relative Strength Index declined from 61.63 to 55.16. Although the MACD crossed above the signal line last Thursday, it never made a significant departure from there, changing its trajectory back downward. A break back below the signal line would suggest the likelihood of a decline.

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For the day, all sectors finished solidly in negative territory, although consumer staples declined by only 10 basis points. Materials and energy took the hardest hits, falling 1.77 percent and 1.56 percent, respectively.

Consumer Discretionary (NYSEARCA:XLY):  -0.53 percent

Technology (NYSEARCA:XLK):  -0.91 percent

Industrials (NYSEARCA:XLI):  -1.30 percent

Materials (NYSEARCA:XLB):  -1.77 percent

Energy (NYSEARCA:XLE):  -1.56 percent

Financials (NYSEARCA:XLF):  -1.12 percent

Utilities (NYSEARCA:XLU):  -0.99 percent

Health Care (NYSEARCA:XLV):  -1.06 percent

Consumer Staples (NYSEARCA:XLP):  -0.10 percent

Bottom line: After better-than-expected economic data sent the S&P 500 Index to record-high closing levels, Wednesday’s disappointing economic reports sent the major stock indices into the red.

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John Nyaradi is the author of The ETF Investing Premium Newsletter.

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