Dull Data Puts a Dampener on the Markets

Disappointing economic data failed to prevent the Dow Jones Industrial Average from reaching a new record intraday high on Thursday. 

It was surprising to see the Dow Jones Industrial Average (NYSEARCA:DIA) reach a new record intraday high despite a disturbing jump in weekly initial unemployment claims to 360,000. The Dow’s intraday surge occurred despite additional downbeat data, including the report on April housing starts and the Philadelphia Federal Reserve’s Business Outlook Survey.

But the Dow then lost 42 points to finish Thursday’s trading session at 15,233 for a 0.28-percent decline. The S&P 500 (NYSEARCA:SPY) declined 0.50 percent to 1,650. The Nasdaq 100 (NASDAQ:QQQ) dipped 0.11 percent to 2,999. The Russell 2000 (NYSEARCA:IWM) declined 0.32 percent to 985.

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In other major markets, oil (NYSEARCA:USO) advanced 0.77 percent to close at $33.87. On London’s ICE Futures Europe Exchange, June futures for Brent crude oil  advanced by 26 cents, or 0.25 percent, to $103.76/bbl. (NYSEARCA:BNO). June gold futures declined by $12.40, or 0.89 percent, to $1,383.80 per ounce (NYSEARCA:GLD).

Transports lost some altitude on Thursday, with the Dow Jones Transportation Index (NYSEARCA:IYT) falling 0.71 percent.

European investors cooled off during Thursday’s trading session after there was no abrupt intervention by the European Central Bank following Eurostat’s report on Wednesday that the 27-nation European Union joined the euro zone in a recession which has been dragging on for six consecutive quarters (NYSEARCA:VGK). The Euro STOXX 50 Index finished with a 0.10 percent decline to 2,806 – remaining above its 50-day moving average of 2,683.  (NYSEARCA:FEZ).

In Japan, stocks made a retreat after the Cabinet Office reported that the nation’s GDP expanded at an annualized rate of 3.5 percent, despite economists’ expectations of 2.7 percent growth. The result raised fears that the market may be overheating. The Nikkei 225 Stock Average declined 0.39 percent to 15,037 (NYSEARCA:EWJ).

In China, stocks surged after the government instituted reforms in accordance with Premier Li Keqiang’s efforts to cut administrative red tape. The Shanghai Composite Index jumped 1.22 percent to 2,251 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index advanced 0.17 percent to 23,082 (NYSEARCA:EWH).

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Technical indicators reveal that the S&P 500 remains far above its 50-day moving average of 1,579 after closing at 1,650 — motivating bears to hope that we are watching the formation of a head-and-shoulders pattern, which would signal a decline. Its Relative Strength Index declined from 73.34 to 68.63 – back below the threshold level of 70, which most investors consider an “overbought” signal. Both the MACD and the signal line continue soaring above the zero line, suggesting the likelihood of a further advance.

For the day, all sectors finished in solidly negative territory except for the technology sector, which rose 0.60 percent. The biggest losers were the consumer discretionary and healthcare sectors.

Consumer Discretionary (NYSEARCA:XLY):  -1.18 percent

Technology (NYSEARCA:XLK):  +0.60 percent

Industrials (NYSEARCA:XLI):  -0.50 percent

Materials (NYSEARCA:XLB):  -0.46 percent

Energy (NYSEARCA:XLE):  -0.49 percent

Financials (NYSEARCA:XLF):  -0.66 percent

Utilities (NYSEARCA:XLU):  -0.82 percent

Healthcare (NYSEARCA:XLV):  -1.03 percent

Consumer Staples (NYSEARCA:XLP):  -0.61 percent

Bottom line: A batch of awful economic reports failed to stop the Dow Jones Industrial Average from reaching an new record intraday high on Thursday.

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

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