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Stocks Close a Strong Month on a Sour Note
By: Schaeffer's Investment Research
"Small-caps were lagging all day -- that was a warning something
wasn't right, and the big drop later in the day was the result,"
noted Schaeffer's Senior Technical Strategist Ryan Detrick, CMT, of
a day where the
Dow Jones Industrial Average (DJI)
spent time on both sides of breakeven, but closed markedly lower.
While the bears claimed today's battle, the bulls won the
longer-term war, as the Dow ended in the black for the sixth
consecutive month. "May did have a nice surprise rally, " said
Detrick, "it's just that the last day of the month left a poor
taste in everyone's mouth."
Continue reading for more on today's market, including :
- Schaeffer's Senior Trading Analyst Bryan Sapp opines why " this week's chop should be resolved soon ." Plus, is now the time to short Sears Holdings ( SHLD )?
- Speculative bulls bucked the overwhelming bearish trend in Advanced Micro Devices ( AMD ) .
- Our Option Idea of the Week : DreamWorks Animation ( DWA ) looks primed to continue its current uptrend.
- Consumer optimism improves -- but consumer spending doesn't --
and Delta Air Lines (
) sees a spike in demand for speculative put options.
The Dow Jones Industrial Average (DJI) did visit positive territory earlier today, but this was a distant memory by the close, when it ended the week at its intraday nadir. At the bell, the index was off 209 points, or 1.4%, at 15,115.57. Just two Dow names were higher today, albeit barely -- Intel ( INTC ) and Alcoa (AA). Meanwhile, Pfizer (PFE) brought up the rear with a loss of 3.6%. The Dow closed lower for a second week -- down 1.2% -- but ended up 1.9% for May.
The S&P 500 Index (SPX) also suffered a steep drop and closed the session at its low point, down 23.7 points, or 1.4%, at 1,630.74. This week, the SPX dropped 1.1%, but it rallied 2.1% this month. The Nasdaq Composite (COMP) , surrendered 35.4 points, or 1%, to close at 3,455.91. On a weekly basis, the tech-laden index lost 0.1%, but it gained 3.8% in May. This was the seventh consecutive monthly gain for both the SPX and the COMP.
The CBOE Market Volatility Index (VIX) moved sharply higher amid today's selling, tacking on 1.8 points, or 12.2%, to close at 16.30. The VIX -- which closed at its highest level since April 18 -- rallied 16.5% this week and 20.6% this month.
A Trader's Take :
"Things were fairly calm earlier today, then the selling floodgates opened around 1:30 p.m.," Detrick summarized. "There wasn't any single reason for the selling, although it sure provided some sparks on what was looking like a very slow day. Also, the huge 1,000 level on the Russell 2000 Index (RUT) once again looks like massive resistance."
3 Things to Know About Today's Market :
- Investor optimism continues to rise , as evidenced by the latest results from the Thomson Reuters/University of Michigan consumer sentiment index. The index's second and final reading for May advanced to 84.5, topping economists' estimates and notching its highest level since the summer of 2007. (Reuters)
- Income and spending levels, on the other hand, aren't seeing the impact of this cheerfulness. The Commerce Department noted that personal incomes were flat in April, while consumer spending edged down 0.2%. Both readings were below the consensus view. (CNBC)
- Meanwhile, in the euro zone, the unemployment rate across the region's 17 countries edged up to 12.2% in April, as 19.4 million people are without work. This was a new record high in the reading, and the situation is even more dire among young people. Nearly one-quarter of residents under 25 are currently still looking for jobs. (The New York Times)
5 Stocks We Were Watching Today :
- The trend toward buying out-of-the-money calls persisted in the Cisco Systems (CSCO) options pits.
- Wells Fargo (WFC) -- and a number of other financial names -- enjoyed a price-target boost at Bernstein today.
- Weekly put options were popular today among Exxon Mobil (XOM) bears.
- As DryShips (DRYS) drifts around the $2 level, option bulls continue to scoop up long calls .
- Delta Air Lines ( DAL ) saw a major pop in bearish options speculation today, but could it have been the work of shareholders?
For a look at today's options movers and commodities activity, head to page 2.
The Organization of the Petroleum Exporting Countries (OPEC) convened today, and collectively decided to maintain the existing 30-million-barrels-per-day target for oil production. Against this backdrop, July-dated crude futures lost $1.64, or 1.8%, to end trading at $91.97 per barrel -- the lowest settlement price for a most-active contract since May 1. Black gold shed 2.3% for the week and lost 1.6% during the month.
Gold futures slumped today, dipping back below the $1,400 level to end the month solidly lower. In today's session, August gold futures shed $19, or 1.4%, to close at $1,393 an ounce. For the week, the precious metal gained just under half a percent, but in May, gold logged a 5.4% drop.