Late in the day on Tuesday, a former Greek prime minister indicated that preparations are under way for an exit from the euro zone. And with that the Dow Jones Industrial Average gave back about 70 points, falling sharply from its high of the day, which came shortly after a positive report that existing home sales in April grew 3.4%.
Despite the broad sell-off in the afternoon, financial stocks were winners with JPMorgan (NYSE:JPM) up 4.61% and Bank of America (NYSE:BAC) up 2.20%. But there was a late shift to “risk-off” stocks, and so utilities did well in the afternoon with the Dow Jones Utility Average up 0.49%.
The Dow closed at 12,503, off 2 points, the S&P 500 gained under a point at 1,317, and the Nasdaq fell 8 points to 2,839. The NYSE traded 847 million shares and the Nasdaq crossed 486 million. Advancers and decliners were almost even on the Big Board, but on the Nasdaq decliners led by 1.73-to-1.
The fragile nature of the stock market was demonstrated by the impact of that statement from a former Greek prime minister yesterday. The market had held its morning highs, up about 75 Dow points, until about 2:30 p.m., when the statement came and the wheels fell off.
The Nasdaq had a gain for most of the day. And had it held, the support line at 2,775 would have formed a small double-bottom off of the lows of Friday and Monday. Instead, yesterday’s loss tells us that Nasdaq has failed to follow through and that the near-term path looks like a test of 2,775 will occur before a test of the resistance line at 2,900.
The flip side of the Nasdaq’s performance was that of the CBOE Volatility Index (VIX), which fell sharply in the morning and closed higher. The VIX is a contra-performer and is telling us that volatility is increasing and that stocks will continue to have pressure from the sellers.
Conclusion: The stock market is in weak hands despite the lack of the public’s participation. How can this be if the market is in the hands of the so-called “professionals”?
The failure of the Nasdaq to handle Facebook’s (NASDAQ:FB) IPO, the huge impact of negative news from Europe, and the end of a boost from Q1 earnings has the “smart money” as confused as the average investor.
Cramer pointed out that “had it not been for the European mess we’d be at new highs.” Yes, and if cows had wings they would fly.
We are dependent upon the success of the European economy. And so today’s meeting of European leaders is important. But if the past is prologue, the meeting probably will produce no more than another delay of the inevitable withdrawal of Greece and extend the uncertainty and fear now present in U.S. markets.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
