by Sam Collins | September 8, 2010 8:57 am
After a week of gains, investors returned from a long weekend ready to nail down profits. The focus of the selling was the financial group, as worries over European banks dominated yesterday’s news.
The KBW Bank Index fell 3.2%. American Express Company (NYSE: AXP[1]) was down 4.1%, JPMorgan Chase & Co. (NYSE: JPM[2]) fell 2.3%, Bank of America Corporation (NYSE: BAC[3]) was off 2.2%, and Barclays PLC (NYSE: BCS[4]) fell 5.9%.
Oracle Corporation (NASDAQ: ORCL[5]) was up 5.9% following the naming of former Hewlett-Packard Company (NYSE: HPQ[6]) CEO Mark Hurd as co-president. Later HPQ said it would sue Hurd for allegedly violating confidentiality agreements.
The selling of stocks resulted in a rush to buy Treasuries. The 10-year note’s yield fell to 2.61%. And the greenback rose 0.9% versus a basket of currencies. The euro fell 1.4% to $1.2695.
At the close, the Dow Jones Industrial Average fell 107 points to 10,341, the S&P 500 lost 13 points at 1,092, and the Nasdaq was off 25 points to 2,209.
The NYSE traded 830 million shares with decliners ahead of advancers by 2.8-to-1. On the Nasdaq decliners were ahead by 3.4-to-1 on volume of 493 million shares.
Crude oil for October delivery fell 51 cents to $74.09 a barrel. The Energy Select Sector SPDR (NYSE:
XLE[7]) fell 81 cents to $53.39.
December gold rose $8.20 to $1,259.30 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU[8]) gained 0.56 points, closing at 187.37.
After a brief respite, volatility is back in the game. Last week’s impressive run by the S&P 500, which resulted in a gain of 3.7%, gave way to profit-taking and a decline yesterday of 1.15%. And the CBOE Volatility Index (VIX) jumped more than 11%.
But yesterday’s volume was one of the lowest of the year, and after four days of gains it’s hard to treat the tape action as a serious reversal. With a low of S&P 500 1,091.15, the pullback partially closed an upside gap opened Thursday at 1,090.1 to 1,093.61. We could see a bit of weakness today, closing the gap and, thus, setting up for the S&P 500 to make another run at the 200-day moving average at 1,115.03.
There was one other technical curiosity yesterday: A trendline drawn from the April high to the August high may have been a barrier to Friday’s advance. The high at 1,105.1 falls almost precisely on that resistance line and could become a barrier to a further advance, especially if the S&P 500 fails to turn quickly and take out Friday’s high.
The long-term trend is still bearish; the intermediate trend is neutral and still within the summer’s trading range of 1,040 to 1,130; and the short-term trend is up.
For one stock that appears to be in an uptrend, see my Trade of the Day[9].
Earnings to be reported before the opening include: Ciena, Hi-Tech Pharmacal, Jackson Hewitt, Smithfield Foods, Talbots, Titan Machinery and United Natural Foods.
Earnings to be reported after the close include: AeroVironment, C&D Technologies, Men’s Wearhouse, Shanda Games and Shuffle Master.
Economic reports due: Bank Reserve Settlement, MBA purchase applications, ICSC-Goldman Sachs store sales, Redbook, quarterly services survey, Beige Book and consumer credit (the consensus expects -$3.5 billion).
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net[10].
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