Markets: Relying on Earnings and Economic Data

It was a mixed day on Wall Street as the Dow and Nasdaq put in mild declines, while the S&P 500 hit a new closing high.

Despite the fact that the Federal Reserve’s FOMC is holding a monetary policy meeting on Tuesday and Wednesday, there has been little attention given to the meeting, as no move toward tapering the Fed’s bond purchases is expected. Apple (NASDAQ:AAPL) made a 0.74-percent advance ahead of its earnings report, which was scheduled for after the market close. The company reported earnings of $8.26 per share on revenue of $37.5 billion, compared with estimated earnings per share of $7.92 on revenue of $36.84 billion. The company’s shares were down as much as 4 percent in the after hours session before rebounding to a more modest 0.45 percent decline.

The Dow Jones Industrial Average (NYSEARCA:DIA) lost 1 point to finish Monday’s trading session at 15,568 for a 0.01 percent decline. The S&P 500 (NYSEARCA:SPY) rose 0.13 percent to reach yet another record-high close at 1,762.11 after hitting a new record intraday high of 1,764.99. The Nasdaq 100 (NASDAQ:QQQ) dipped 0.03 percent to finish at 3,382. The Russell 2000 (NYSEARCA:IWM) also took a 0.03 percent dip to end the day at 1,117.97.

In other major markets, oil (NYSEARCA:USO) advanced 0.65 percent to close at $35.55. On London’s ICE Futures Europe Exchange, December futures for Brent crude oil advanced $2.44 (2.28 percent) to $109.37/bbl. (NYSEARCA:BNO). December gold futures declined 40 cents (0.03 percent) to $1,352.10 per ounce (NYSEARCA:GLD). Transports were in the express lane on Monday, with the Dow Jones Transportation Average (NYSEARCA:IYT) advancing 0.46 percent.

In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Stocks soared on Monday as the yen weakened against the dollar. A weaker yen causes Japanese exports to be more competitively priced in foreign markets. The yen weakened to 97.65 per dollar during Monday’s trading session in Tokyo (NYSEARCA:FXY).

Prime Minister Shinzo Abe’s decision to raise the nation’s sales tax to 8 percent from 5 percent (beginning in April), gave a boost to his “Abenomics” program, after many of the promised “Third Arrow” reforms never materialized. The Nikkei 225 Stock Average skyrocketed 2.19 percent to 14,396 (NYSEARCA:EWJ).

Earnings reports drove China’s stock markets during Monday’s trading. Good news from energy companies barely outweighed disappointments from the healthcare sector. The Shanghai Composite Index rose 0.04 percent to close at 2,133 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index advanced 0.48 percent to end the day at 22,806 (NYSEARCA:EWH).

In Europe, a number of downgrades for automobile manufacturers led Monday’s decline. JPMorgan Chase (NYSE:JPM) downgraded the entire European automotive sector from “overweight” to “neutral”. Fiat sank 3.20 percent on the news. BMW shares fell 1.48 percent and Volkswagen dropped 0.82 percent.

The Euro STOXX 50 Index finished Monday’s session with a 0.41 percent decline to 3,022 — remaining above its 50-day moving average of 2,894. Its Relative Strength Index is 62.83 (NYSEARCA:FEZ).

Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,689 after finishing Monday’s session with a 0.13 percent advance to 1,762.11. Its Relative Strength Index rose from 67.64 to 68.20. Although the MACD continues to climb further above the signal line, the MACD histogram indicated a slight decline, suggesting the likelihood of a retreat.

 

For Monday, four sectors finished in positive territory and five sectors finished in the red. The consumer staples sector led the group with a 1.31 percent advance.

Consumer Discretionary (NYSEARCA:XLY): -0.19 percent
Technology: (NYSEARCA:XLK): +0.33 percent
Industrials (NYSEARCA:XLI): -0.14 percent
Materials: (NYSEARCA:XLB): -0.50 percent
Energy (NYSEARCA:XLE): +0.08 percent
Financials: (NYSEARCA:XLF): -0.24 percent
Utilities (NYSEARCA:XLU): -0.20 percent
Health Care: (NYSEARCA:XLV): +0.34 percent
Consumer Staples (NYSEARCA:XLP): +1.31 percent

Bottom line: Although the Dow and the Nasdaq indices began the week with a slight retreat, the S&P 500 set a new record intraday high, before reaching a record-high close. U.S. stock indexes remain stuck below significant long term support and in overextended, overbought, and over-exuberant territory. It’s unlikely that any more help will be coming from the Fed this week (although one never knows) and so the ongoing surge of earnings and economic reports will be market drivers.

Monday’s economic reports were mixed as industrial production beat forecasts, while pending home sales completely collapsed. On Tuesday we’ll get the important retail sales and consumer confidence reports along with earnings from dozens of companies, including notables Goodyear (NYSE:GT), LinkedIn (NYSE:LNKD), and Yelp (NYSE:YELP).

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

Don’t Miss: White House to Democrats: Economy Justifies Entitlement Cuts.

More from The Cheat Sheet