The non-farm payrolls report, aka, the jobs report, was released before the market opened this morning, and it appeared to be roughly in line with expectations with +192 thousand jobs and the unemployment rate remaining unchanged at 6.7%. The S&P futures rose a bit and the market opened an hour later with the S&P 500 up about $7, hitting its high for the day at $1897 around 10:30 am ET. Then the other shoe dropped. All of the broad market averages began a steady decline for the balance of the day. SPX closed down $24 at $1865. But RUT was much weaker, closing at $1153, down $28. Early indicators were for a significant increase in trading volume with a 32% increase on the NYSE and a 29% increase on NASDAQ. But volatility didn’t increase as much as one might expect, with the VIX closing at 14.0%, up 0.6 points.
This raises the question: Is this the long awaited correction or is it just the expected round of profit-taking after such a strong bull market? I am inclined toward the latter view for the following reasons:
SPX lost 1.3% today, but RUT lost 2.4% - small caps were being sold preferentially.
SPX lost 1.3% today, but NASDAQ lost 2.7% - high tech winners and momentum stocks like NFLX were being sold preferentially.
SPX took a large loss today, but didn’t even attempt to challenge strong support levels at $1840 and $1850.
RUT hit $1150 as its intraday low today, well above the recent pull back low and the support level set by the late December high.
VIX was up less than one percentage point and closed just under 14% - the big institutional traders aren’t hedging very strongly, if at all.
IBM closed today’s trading at $192, only down one dollar in this market.
Today was full of red ink, but RUT has been trading weaker than the rest of the market for the past couple of weeks; it never did approach its all-time highs earlier this week as SPX was setting records. RUT has been showing us weakness in the small cap space; but the question remains whether the small cap sell-off leads to more general market correction. I am encouraged by VIX remaining low today and stocks like IBM showing relative strength. We'll see.
Enjoy your weekend.
