Market Concerns Are At Bay For Now

Once again, the S&P 500 reached a new record high on Monday although its record-high close was just a whisker above Friday’s closing level.

Concerns about the weekend reports on the U.S. Federal Reserve’s plans to taper back its quantitative easing program were eclipsed by a better-than-expected Retail Sales report on Monday. After the U.S. Department of Commerce’s Census Bureau reported that retail sales for April advanced by 0.1 percent, compared with economists’ expectations of a 0.3 percent decline, the bulls were back to retain their turf.

The Dow Jones Industrial Average (NYSEARCA:DIA) lost 26 points to finish Monday’s trading session at 15,091 for a 0.18-percent decline. The S&P 500 (NYSEARCA:SPY) climbed a nearly-imperceptible seven one-hundredths of a single point (not a percentage) to set a new record-high close at 1,633.77 from Friday’s 1,633.70. The S&P also reached a new intraday record high of 1,636.

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The Nasdaq 100 (NASDAQ:QQQ) rose 0.04 percent to 2,982. The Russell 2000 (NYSEARCA:IWM) slipped 0.14 percent from Friday’s record high close to end the day at 973. In other major markets, oil (NYSEARCA:USO) declined 0.82 percent to close at $33.86.

On London’s ICE Futures Europe Exchange, June futures for Brent crude oil  declined by $1.15, or 1.11 percent, to $102.50/bbl. (NYSEARCA:BNO, NYSEARCA:USO). June gold futures declined by $6.00, or 0.42 percent, to $1,430.60 per ounce (NYSEARCA:GLD).

Transports slipped into reverse on Monday, with the Dow Jones Transportation Index (NYSEARCA:IYT) declining 0.51 percent.

European stocks had a tough session on Monday, as investors remained concerned about Wednesday’s release of GDP data on a number of euro zone countries, including Germany. The Euro STOXX 50 Index finished Monday’s trading session with a 0.28 percent decline to 2,777 — remaining above its 50-day moving average of 2,673.

Japanese stocks continued to climb higher on Monday after the G-7 finance ministers, at their weekend meeting in Britain, signaled that they had no objection to further weakening of the yen. A weaker yen results in more-competitive prices for Japanese exports in foreign markets (NYSEARCA:FXY). During Monday’s trading session in Tokyo, the yen sank as low as 102.11 per dollar. The Nikkei 225 Stock Average jumped 1.20 percent to 14,782 (NYSEARCA:EWJ).

In China, stocks declined after a report from the National Bureau of Statistics revealed that fixed-asset investment during the first quarter of the year advanced by 20.6 percent, falling short of economists’ expectations of a 20.9 percent increase. The Shanghai Composite Index declined 0.22 percent to 2,241 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index sank 1.42 percent to 22,989 (NYSEARCA:EWH).

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Technical indicators reveal that the S&P 500 remains far above its 50-day moving average of 1,572 after closing at 1,633.77 — 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 ticked upward from 67.36 to 67.37 — approaching the threshold level of 70. Most investors consider a Relative Strength Index above 70 as an “overbought” signal. The MACD remains above the signal line, suggesting the likelihood of a further advance.

For the day, half of the sectors finished in negative territory.  The biggest losers were materials and utility. The healthcare sector had the best day of the group, with a 0.83-percent advance.

Consumer Discretionary (NYSEARCA:XLY):  +0.02 percent

Technology (NYSEARCA:XLK):  -0.25 percent

Industrials (NYSEARCA:XLI):  -0.39 percent

Materials (NYSEARCA:XLB):  -0.71 percent

Energy (NYSEARCA:XLE):  -0.01 percent

Financials (NYSEARCA:XLF):  +0.31 percent

Utilities (NYSEARCA:XLU):  -0.53 percent

Health Care (NYSEARCA:XLV):  +0.83 percent

Consumer Staples (NYSEARCA:XLP):  +0.17 percent

Bottom line: Many stock sectors finished Monday’s trading session in negative territory despite the fact that the S&P 500 set a new record intraday high and beat Friday’s record close.

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

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