Courtesy of John Nyaradi.
Stocks and ETFs slide but manage to trim losses in last 30 minutes of trading day
U.S. stocks and ETFs put in a see-saw session on Thursday but managed to finish with minor losses for the day.
The Dow Jones Industrial Average (NYSEARCA:DIA) fell 0.30%, closing at 13,944, dropping another 42 points farther away from the magic 14,000 level.
The S&P 500 (NYSEARCA:SPY) closed down 0.18% while the Nasdaq 100 (NYSEARCA:QQQ) squeaked out a 0.01% gain. The Russell 2000 Index (NYSEARCA:IWM) of small cap stocks put in the weakest performance among major indexes and their related ETFs with a decline of 0.35%.
In other major markets, Gold (NYSEARCA:GLD) lost 0.36% to close at $1671.70/oz. and oil (NYSEARCA:USO) dropped 0.8% to close at $95.98/bbl.
News from Europe was mixed as the European Central Bank adjourned its meeting with no change in interest rates, as expected, but President Mario Draghi surprised investors at a news conference where he said that a strong Euro could hurt economic growth in the region. The Bank of England also left its interest rate unchanged.
In economic news, weekly jobless claims came in at 366,000, down from last week’s 371,000, consumer credit fell and labor costs rose. Read “Mixed News On Unemployment Claims”
Tomorrow closes out the week with December trade deficit and wholesale inventory reports along with more earnings reports as earnings season winds down.
So major stock and ETF indexes continue trading sideways to weaker in the face of significant overhead technical resistance and before the upcoming fiscal cliff debate. Momentum is slowing and breadth is weakening as the days drag on below the critical 14,000 level in the Dow Jones Industrial Average. Read “Like It Or Not, There Is A Rhythm”
A look to the bond market and bond ETFs (NYSEARCA:IEF) shows a rebound in bond prices as doubt creeps back into equities markets.
VIX, (NYSEARCA:VXX) the CBOE S&P 500 Volatility Index, also known as the “fear” index, gained 0.67% today, however, continues trading in a mostly sideways pattern along with major stock and ETF indexes.
The upcoming “sequestration” debate is garnering more headlines as the Navy announced Wednesday afternoon that it was canceling deployment of the aircraft carrier U.S.S. Truman to the Persian Gulf previously scheduled for this Friday. The cancellation is due to the looming mandatory budget cuts due to hit March 1st without a change of current law and will leave the United States with just one, instead of the customary, two aircraft carriers in the Persian Gulf region.
The Defense Department is in line to cut more than $40 million from its budget in 2013 and Secretary of Defense Panetta said his department plans to furlough up to 800,000 civilians for as long as three weeks and also is discussing halving a planned pay raise for military personnel. These kinds of cuts will obviously impact the broader economy and other Federal agencies are preparing similar reductions in spending if the “fiscal cliff” isn’t dodged once again.
Of course, everyone expects Congress and the White House to reach some sort of settlement, however, some level of government spending cuts are a near certainty and reduced spending will reduce already weak, or zero U.S. economic growth. In the long run, this can’t be good news for U.S. stocks and ETFs. Finally, the U.S. Post Office is suspending Saturday mail delivery in August in an attempt to cut costs and survive in today’s digital age.
Bottom line: Stocks and ETFs have stalled at significant technical resistance levels and in the face of the upcoming “sequestration” debate and the growing possibility of significant reductions in government spending. Major stock and ETF indexes have stalled at this level twice before and then suffered significant declines. Over the next weeks and months, stocks and ETFs will reveal whether or not the “third time’s the charm” for a new bull market.
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