Stocks opened broadly lower Monday and for a few hours bearish investors must have felt they were finally on the winning side, says Jon Markman, editor of Pivotal Point.
Then reality set in. The S&P 500 (SPX) moved from an early 0.70% deficit to a 0.25% advance by the close. The benchmark is now at 4,479 and Apple (AAPL), Amazon.com (AMZN), Microsoft (MSFT), and Facebook (FB) look as though they are ready to begin a new leg higher. It is a familiar refrain. Bull markets feature rolling corrections.
When one part of the market fatigues there is always another sector waiting to resume its uptrend. Breadth is waning, however, and the uptrend appears fatigued amid an overbought condition. A few days or a week or so of sideways churning will probably bring buyers back in a big way.
The first key support level for the benchmark S&P 500 is 4,415. There is not any real resistance until 4,600. The Dow rose 0.3% to 35,625 on Monday while the Nasdaq Composite fell by 0.2% to 14,793. Energy and materials were among the steepest decliners while health and utilities led the gainers among the sectors.
Breadth favored decliners at 2-1, and there were 424 new highs vs a whopping and worrisome 345 new lows. Big caps on the new high list included Apple, Microsoft, Alphabet Inc. (GOOGL), Johnson & Johnson (JNJ), Pfizer (PFE), and Danaher (DHR). Major names on the new low list include Spotify (SPOT), Tencent Music (TME), LegalZoom (LZ), Oatly (OTLY), and Vimeo (VMEO)—all consumer electronics and recent IPOs, which is interesting and shows there's just not enough money to go around for unproven entities.
The 10-year US Treasury yield dropped to 1.27% from 1.30% late Friday. West Texas Intermediate crude declined 1.5% to $67.41 per barrel.
In economics news, the Empire State Regional Manufacturing Index came in at 18.3 for August vs. market expectations of 28.5, so that was a big and shocking miss. ...And China's retail sales were up 8.5% year-over-year in July, slowing from a 12.1% annual gain in June and missing guidance for an increase to 11.5%. China's industrial production was up 6.4% year-over-year in July, lagging forecasts for a 7.8% jump, and compared with a 8.3% annual gain in the previous month. This was also very disappointing.
In corporate news, the US National Highway Traffic Safety Administration launched a formal investigation into Tesla's (TSLA) autopilot system after identifying 11 collisions at emergency response sites with the system engaged over the past four years. Shares sank 4.3%, the worst decline in the S&P 500.
Sonos (SONO) rose 4.7% after the chief administrative judge for the US International Trade Commission late Friday issued a preliminary decision backing the speaker technology company's claims that Google infringed on five Sonos patents with its own speakers. The full ITC is expected to rule in the case Dec. 13. Alphabet shares were fractionally higher.
Learn more about Jon Markman at Pivotal Point.
