Things were pretty mixed up today. The major indices all posted slight gains, but the moves were small and on very light volume. The Dow added 8 points (+0.1%) to 11138, the S&P 500 gained a point (+0.1%) to 1289 and the Nasdaq picked up 11 points (+0.5%) to 2326. The Russell 2000 also moved higher, gaining 3 poitns (+0.5%) to 751. The Dow Transports were up 0.3% while the Utilities dipped 0.6%. Bonds had another bad day, and rates moved much higher, especially on the long end of the curve, pushing the 10-year yield above 5 percent for the first time in almost four years. That leaves us with the 6-month at 4.92%, 2-year 4.95%, 5-year 4.97%, 10-year 5.05% and the 30-year 5.11%. It’s been quite a while since we’ve seen yields like that!
Market internals were mixed, looking much stronger on the Nasdaq than on the NYSE, but on very light trading volume all around. Advances/declines were 4 to 5 on the NYSE but 3 to 2 on the Nasdaq, with up/down volume flat on the NYSE but nearly 3 to 1 on the Nasdaq. Another day with more new lows than highs on the NYSE: new highs/lows numbers were 67/169 on the NYSE and 89/44 on the Nasdaq.
More groups were up than down today, but the moves weren’t big ones. On the up side we find airlines (+1.6%), oil services (+1.2%), steel stocks (+1.1%), biotechs (+1.0%) and computer hardware (+1.0%), while the REITs (-1.2%) led the small group of losers.
Energy prices were higher: crude oil up 70 cents to $69.32/barrel, gasoline jumped another few cents to $2.11/gallon, and natural gas climbed back above 7 bucks to $7.14/mmBTU. The dollar index was pretty much unchanged by the end of the day at 89.55. Gold is selling for $596/ounce, and silver moved even higher, to $12.89/ounce.
BMB Note: I hate to sound like a broken record, but the breakdown in bonds - and resulting higher yields - are still a big concern for stocks. For the investor, it may be music to your ears to start to receive some returns on your cash - and that should have you rethinking your asset allocation a bit. With cash paying decent rates, and yields continuing to move up on the short-end of the curve, you don’t need to put nearly as much of your money at risk in the stock market - which is certainly struggling for the time being. And as long as rates are moving higher, it makes sense to stay with shorter duration instruments, that can be rolled into higher rates (hopefully) as they mature.
As for stocks, not a lot has changed. Some of the areas that had broken down have now bounced a little, and the more aggressive traders may start to look for shorting opportunities in areas like the HMOs or the biotechs, maybe the airlines. Other areas, like REITs and health care products, haven’t gotten their bounce yet. As for the long side, I still favor the commodity related areas, as those are still holding up rather well. We’re now seeing some weakness in a few other areas that had been doing well, namely the networking stocks, telecoms and defense stocks - but it remains to be seen whether those groups are just pulling back or beginning to roll over.
Bottom line - I think many stocks are looking vulnerable here. It will be very interesting to see which the direction the market gets pulled once some decent volume comes back into play, assuming it does at some point. Until there’s some conviction, you have to remain somewhat defensive, decide where your stop points are, and be prepared to push the ‘eject’ button if that big volume move starts to take things lower.
