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The markets opened lower this morning but then bounced higher with SPX tacking on twenty dollars to close at $2062. RUT gained $11 to $1106. Volatility retreated with the VIX closing down 1.4 points to 14.9%. Trading volume popped higher with 2.4 billion shares of the S&P 500 companies trading. Trading volume on the NYSE rose 19% and volume rose 15% on NASDAQ.
No significant economic data was reported today. The Fed's beige book (minutes from the last meeting) will be issued tomorrow afternoon. Those minutes could be market moving, depending on the recorded discussions. Analysts are looking for clues for the timing of the next interest rate hike.
Even with today's large move, the trend of SPX remains sideways. A break above $2075 would be necessary to start to take the bulls' case seriously. I fail to see the economic data to make the case for a strong bull market. But the market could trade higher on the back of the Fed. That is why the beige book release is potentially significant.
J. P. Morgan reports earnings tomorrow morning. That could set the tone for the market opening tomorrow, but then the beige book takes over in the afternoon.
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Markets hesitated today as Alcoa was set to kick off this earning season. SPX opened higher but couldn't hold the highs and closed down $6 at $2042. RUT lost $3 to $1094. Volatility rose about one full point with the VIX closing at 16.2%. Trading volume was basically flat with 2.1 billion shares of the S&P 500 trading today. Trading volume rose 7% on the NYSE, but fell 3% on NASDAQ.
Alcoa (AA) beat analyst earnings estimates but missed sales estimates, so shares were lower in after hours trading. Traders often watch AA for a guage of basic industrial strength. The big banks report later this week and will be watched for additional clues of overall economic strength. Analysts' earnings estimates have been revised downward significantly more than usual as the first quarter progressed, so more attention than usual is being paid to the sales and earnings data as well as the outlooks for the next quarter for the blue chip stocks.
Several members of the FOMC are speaking this week in advance of the beige book being released Wednesday. I am unsure all of this increased transparency is good for the markets. It seems to contribute to the daily price volatility.
If earnings do come in lower this quarter as analysts have predicted, today's market weakness may be the new normal for several weeks.
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The markets were subdued today, probably due to many traders taking an extended long weekend. The fact that markets remained closed in Europe may have influenced those decisions. SPX closed at $2037, up one dollar. RUT also closed up one dollar at $1073. Volatility rose a half point to 15.2%. Trading volume reflected the small market gains with only 1.7 billion shares of the S&P 500 stocks trading today. Trading dropped 17% on the NYSE and declined 12% on NASDAQ.
Pending home sales were encouraging, increasing 3.5% in February, a big improvement over January's 3.0% decline.
The balance of the week is loaded with economic data: Case Schiller housing prices, ADP private payrolls, Chicago PMI, ISM manufacturing index, and construction spending. And the week ends with the jobs report, aka, the non-farm payrolls report.
Until tomorrow...
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Several reports of the decline of first quarter earnings have been receiving a lot of attention on Wall Street. FactSet summarized the changes of analyst earnings estimates for companies in the S&P 500 for the first quarter of 2016. The aggregation of the earnings estimates for all the companies in the index dropped by 9.6% during this period. By comparison, the average decline in quarterly earnings estimates over the past 10 years is 5.3%. Analysts don’t like what they are seeing in 2016 and this began to weigh on the market in this week's trading. SPX dropped $21 to close at $2045 and RUT lost $13, closing at $1096. Volatility rose with the VIX closing up 1.3 points to 15.4%.
Trading volume rose today with 2.5 billion shares of the S&P 500 companies trading. Trading volume rose 15% on the NYSE but was nearly flat on NASDAQ (up 0.4%).
The ISM services index came in at 54.5 for March, up from 53.4. JOLTS job openings dropped slightly in February, from 5.604 million to 5.445 million.
An article in IBD today speculated that the high tech sector may be particularly hard hit in this earnings season. FactSet's report issued last week, but that story is gaining visibility and worrying traders. All of the craziness of the presidential primaries probably isn't helping either.
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We had become accustomed to higher prices every day, but it had to slow down eventually. Yesterday's market shook off the Brussels attack, but pulled back a bit today for no apparent reason. SPX closed down $13 to $2037 and RUT gave up $22 to close at $1076. Volatility rose almost one point with the VIX at 14.9%. Trading volume was up slightly with 2.1 billion shares of the S&P 500 companies trading. Trading on the NYSE rose 8% and trading volume was up 11% on NASDAQ.
New home sales came in at 512 thousand for February (annualized); this is a small increase from January's 502k.
The 200 dma at $2017 should act as support for the SPX. The resistance level at $2050 has now been reinforced; it will be even harder to break through next time. RUT is back in the neighborhood of the August flash crash retest. Earlier this month, RUT thrashed in this area for about two weeks and never did break through the August flash crash levels at about $1105. We may be caught in this choppy market for a while.
