Stocks fell on light volume yesterday, following more news about
troubled European economies. A stronger opening in U.S. stocks was
followed by midday selling after the euro slipped and the U.S.
dollar rallied. And Moody's said that it may downgrade its rating
on Spanish debt, while S&P lowered its ratings outlook on
Belgium from "stable" to "negative."
In economic news, the Consumer Price Index (CPI) for November
rose 0.1% versus 1.1% a year ago, and confirmed the Fed's view that
inflation is not currently a problem. And the Fed reported that
industrial production in November rose 0.4%, but capacity
utilization increased by only 0.3% to 75.2% in October, which is
well below average. The National Association of Home Builders said
its index of builder confidence was flat in December.
In corporate news,
) rose 5.7% after increasing its offer for eye-care specialist
Goldman Sachs Group, Inc.
) fell 1.3%, and
) fell 1.6% following a cut in ratings of investment banks by
several Wall Street analysts.
Joy Global Inc.
) jumped 6.9% after exceeding analysts' fiscal year Q4 earnings
The Boston Beer Company, Inc.
) raised its forecast for 2010 earnings to $3.30 to $3.60 from
$2.85 to $3.15, and the stock spiked 12.06%.
Treasurys continued to fall with the 10-year note dropping
0.531% to yield 3.524%, and the 30-year bond dropped 0.686% to
yield 4.598%. Municipal bonds continued to be hard hit as prices
fell sharply for the second consecutive day. Yields are now at the
highest in 16 months with high-grade 30-year bonds at 4.84%.
The euro took a big hit on Wednesday, falling to as low as
$1.3210, down 1.6% from Tuesday's final price.
At the close, the Dow Jones Industrial Average fell 19 points to
11,457, the S&P 500 dipped 6 points to 1,235, and the Nasdaq
was off 11 points at 2,617. The NYSE traded 1.1 billion shares with
decliners over advancers by over 2-to-1. The Nasdaq crossed 552
million shares with decliners ahead by 1.5-to-1.
Crude oil for delivery in January rose 34 cents to $88.62 a
barrel, and the
Energy Select Sector SPDR
) fell 36 cents to $65.79. February gold fell $18.10 to $1,386.20
an ounce. The
PHLX Gold/Silver Sector Index
was off 3.89 points to 221.20.
What the Markets Are Saying
After pushing hard for a new two-year high, the Dow Industrials
succumbed to light selling yesterday and a minor reversal. But the
downside leader was the broad-based S&P 500, off 0.51%, which
broke its near-term pattern setting the index up for a pullback to
its most recent breakout line at 1,227.
The Dow started off higher yesterday and held its gains until
lunchtime when the European markets closed lower with the euro
taking a real beating and the dollar again soaring. It was at that
exact moment that U.S. markets turned south as the euro down/dollar
up/stocks down pattern reasserted itself.
Those who wish to follow the euro should focus on the
CurrencyShares Euro Trust
), which is an exchange-traded fund (ETF) directly tied to the
currency. From a technical viewpoint, FXE is in a correction
following a run to over $1.42 in early November. It has support at
its 200-day moving average at $131 and an intermediate support line
at $130. The trust closed yesterday at $131.69.
Yesterday's shallow retreat does not change the overall
direction of the market, which is long term up and intermediate
term up. But short-term traders may now want to ride a pullback to
the first meaningful support lines for each of the indices.
Here is a summary of near-term support for each of the major
Dow: 11,259 (20-day moving average) S&P 500: 1,227 (November
breakout) Nasdaq: 2,592 (November breakout)
Readers will note that, with the exception of the Dow
Industrials' number, these are the same support lines noted in
Daily Market Outlook
, which recognized the one-day reversal of Nasdaq on Monday,
preceded by eight successive advances.
Long-term traders should prepare to buy their favorite yuletide
stock picks on a shallow pullback in preparation for a year-end to
mid-January rally. (For one such stock, see the
Trade of the Day
.) But day traders may want to take any intraday rally as an entry
point for a quick downside trade.
Today's Trading Landscape
To see a list of the companies reporting earnings today,
For a list of this week's economic reports due out,
If you have questions or comments for Sam Collins, please
e-mail him at