Equities Falter Ahead of Earnings Season; Are Expectations Too Low?

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The Dow Jones Industrial Average (DJI) couldn't do much to make up for Friday's slide today, as many bulls opted to stay home. "Jitters ahead of tonight's kick-off to earnings season pushed us lower," said Schaeffer's Senior Technical Strategist Ryan Detrick. "Volume wasn't too high, though, so we didn't see any big sellers on the day. Given that overall expectations are extremely low for second-quarter earnings, any good news could potentially spark a nice rally."

Click through to see what else was on our radar today:

  • Bernie Schaeffer examined how sentiment helped steer the action in the homebuilders ETF.
  • Could the recent bounce in oil spawn a downturn for the airlines sector ?
  • Plus, two signs that up the chances for a summertime upswing .
And now, a look at the numbers...

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

The Dow Jones Industrial Average (DJI - 12,736.29) was off nearly 86 points at its session low of 12,686.57, but was able to pare some of its losses and close down 36.2 points, or 0.3%. Half of the 30 blue chips tripped lower today, as DuPont ( DD ) paced the underperforming components with a 2.9% decline. Merck ( MRK ) led the fifteen wining issues with a 1.5% jump.

The S&P 500 Index (SPX - 1,352.46) also suffered a defeat, falling 2.2 points, or 0.2%. Meanwhile, the Nasdaq Composite (COMP - 2,931.77) dropped 5.6 points, or 0.2%.

The CBOE Market Volatility Index (VIX - 17.98) notched a win today, climbing 5.2%, and settling below its session high of 18.32.

Today's highlight : "I loved seeing two buyouts for significant premiums ," smiled Detrick. "Both FX Alliance ( FX ) and AMERIGROUP ( AGP ) were acquired for approximately 40% more than their closing prices on Friday. Mergers and acquisitions news is always a bullish sign, and should we continue to see this trend -- especially coupled with a better-than-expected second-quarter earnings season -- it could bode well for the second half of the year."

Turning to today's major market stories...

For today's activity in commodities, options, and more, head to page 2.

Oil futures turned higher today, gaining back more than half of Friday's jobs-data induced sell-off . The commodity was supported by a softer dollar and the escalating likelihood of a shutdown in Norwegian oil production after labor talks there ended with no resolution. By the close, crude for August delivery added $1.54, or 1.8%, to settle at $85.99 a barrel.

Gold futures got a similar boost from a weakening greenback, and reclaimed some of last-week's deficit. The malleable metal also got a lift from data out of China that showed showed slowing inflation in June . As bargain-hunting speculators returned from the sidelines, August-dated gold gained $10.20, or 0.7%, to close at $1,589.10 an ounce.

Levels to watch in trading...

  • Dow Jones Industrial Average (DJI - 12,736.29) - support at 11,500; resistance at 14,000
  • S&P 500 Index (SPX - 1,352.46) - support at 1,100; resistance at 1,500
  • Nasdaq Composite (COMP - 2,931.77) - support at 2,400; resistance at 3,400

OUTPERFORMING AND UNDERPERFORMING SECTORS

STOCKS - MOVERS

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Click the links for coverage on today's notable annual highs and notable annual lows .

SCHAEFFER'S MARKET POSTURE

At the end of every market day, the staff at Schaeffer's Investment Research reviews the trading day in detail, covering major events and key market developments. Don't miss this critical, timely and insightful report. If you enjoyed today's edition of Market Recap, sign up here for free daily delivery straight to your inbox.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: AGP , CSTR , DD , FX , MRK

Schaeffer's Investment Research

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