Although it failed to close at another record high on Thursday, the Dow Jones Industrial Average reached a new intraday high.
The Dow Jones Industrial Average (NYSEARCA:DIA) extended its residence in the 15,000 range on Thursday as it continued beyond 15,100. After reaching a new record intraday high of 15,144.83 at 1:48 p.m. EDT, the Dow ran out of fuel at 2:28 p.m., when a head-and-shoulders pattern took shape on the chart, sending many investors running for the exits.
The S&P 500 (NYSEARCA:SPY) followed a similar course, fading from an intraday record high during the last 90 minutes of the session. Philadelphia Federal Reserve president Charles Plosser was to blame for the buzzkill after his statement that he would join forces with Kansas City Fed Head Esther George to advocate attenuation of the quantitative easing program at the June 18 FOMC meeting.
The day got off to a good start because the U.S. Department of Labor reported that initial unemployment claims fell to 323,000 despite expectations of an increase to 335,000.
Thursday also brought some big stock winners. Ocean Power Technologies (NASDAQ:OPTT) skyrocketed 33.78 percent after Ascendiant Capital Markets initiated coverage on the stock as a Strong Buy. Green Mountain Coffee Roasters (NASDAQ:GMCR) soared 27.84 percent after the company raised its profit forecast for the fiscal year ending in September from $2.82 per share to $3.15 per share due to the popularity of its K-Cup product line.
One of the most shorted stocks on the market, Tesla Motors (NASDAQ:TSLA), reported adjusted quarterly earnings of 12 cents per share, running over expectations of only 3 cents per share. It was Tesla’s first profitable quarter. Thursday’s trading session resulted in a massive short squeeze, on the very day when Consumer Reports announced that the Tesla Model S had achieved its highest score ever of 99. Although the same score was achieved by the Lexus LS460 in 2009, Consumer Reports has described the Tesla as the best car it has ever tested. Tesla’s share price finished the session with a gain of 24.40 percent.
The Dow lost 22 points to finish Thursday’s trading session at 15,082.62 for a 0.15-percent decline. Nevertheless, the Dow reached a new record intraday high of 15,144.83. The S&P 500 declined 0.37 percent to close at 1,626.67 after setting a new intraday record high of 1,635.01.
In other major markets, oil (NYSEARCA:USO) declined 0.67 percent to close at $34.17. On London’s ICE Futures Europe Exchange, June futures for Brent crude oil advanced by 5 cents, or 0.05 percent, to $104.08/bbl. (NYSEARCA:BNO). June gold futures declined by $16.30, or 1.11 percent, to $1,457.40 per ounce (NYSEARCA:GLD). Transports stalled on Thursday, with the Dow Jones Transportation Index (NYSEARCA:IYT) sinking 1.11 percent.
European stocks had a lackluster day, with The Euro STOXX 50 Index finishing with a 0.41-percent drop to 2,773 — remaining above its 50-day moving average of 2,665.
In Japan, stocks were off to a good start, but they sank during the final three hours of the session as the yen picked up some strength. A stronger yen results in less-competitive prices for Japanese exports in foreign markets (NYSEARCA:FXY). The Nikkei 225 Stock Average declined 0.66 percent to 14,191 (NYSEARCA:EWJ). After the closing bell in Tokyo, the yen sank against the dollar. “Yenny watch” has finally reached a climax as the currency is now worth less than one cent, trading at 100.7 per dollar.
In China, stocks declined after the National Bureau of Statistics reported that producer prices fell 2.6 percent in April due to weakening demand. The result confirmed fears that the nation’s economy was getting soft. The Shanghai Composite Index (NYSEARCA:FXI) declined 0.59 percent to 2,232. Hong Kong’s Hang Seng Index (NYSEARCA:EWH) dipped 0.14 percent to 23,211.
Technical indicators reveal that the S&P 500 remains far above its 50-day moving average of 1,567 after closing at 1,626.67 — 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 68.58 to 65.54 — further below 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. Nevertheless the trajectory of the MACD has flattened while the signal line is ascending.
For the day, most sectors finished in negative territory, except for healthcare and consumer discretionary, which made modest advances. The utilities sector trailed the group.
Consumer Discretionary (NYSEARCA:XLY): +0.14 percent
Technology (NYSEARCA:XLK): -0.28 percent
Industrials (NYSEARCA:XLI): -0.02 percent
Materials (NYSEARCA:XLB): -0.15 percent
Energy (NYSEARCA:XLE): -0.11 percent
Financials (NYSEARCA:XLF): -0.73 percent
Utilities (NYSEARCA:XLU): -1.51 percent
Health Care (NYSEARCA:XLV): +0.17 percent
Consumer Staples (NYSEARCA:XLP): -0.70 percent
Bottom line: The importance of the quantitative easing program to stock market performance became apparent on Thursday after Philly Federal Reserve President Charles Plosser announced that he would advocate attenuation of the program at the next FOMC meeting. The major stock indices headed south after widespread publication of Plosser’s remarks.
John Nyaradi is the author of The ETF Investing Premium Newsletter.
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