If Tuesday’s stock market advance resulted from an upbeat Consumer Confidence Index, why did investors sink the consumer discretionary sector?
On Tuesday, the Conference Board released a better-than-expected Consumer Confidence Index for March, which jumped to 82.3 from February’s 78.3. Economists were expecting a less-significant advance to 78.4. Unfortunately, investors did not share the confidence expressed by consumers. Although the report was credited for Tuesday’s stock market advance, investors remained bearish on the consumer discretionary sector. The Consumer Discretionary Select Sector SPDR ETF (ARCA:XLY) sank 0.60 percent to $64.63, crossing below its 50-day moving average of $64.95. A bearish, head-and-shoulders pattern suggests that a further decline could take place with XLY.
The Dow Jones Industrial Average (ARCA:DIA)) picked up 91 points to finish Tuesday’s trading session at 16,367 for a 0.56 percent advance. The S&P 500 (ARCA:SPY) rose 0.44 percent to 1,865.
The Nasdaq 100 (NASDAQ:QQQ) advanced 0.34 percent to finish at 3,629. The Russell 2000 (ARCA:IWM) dipped 0.02 percent to 1,178.
In other major markets, oil (USO) declined 0.14 percent to close at $35.77.
On London’s ICE Futures Europe Exchange, June futures for Brent crude oil advanced 14 cents (0.13 percent) to $106.75/bbl. (NYSEARCA:BNO).
June gold futures advanced 60 cents (0.05 percent) to $1,311.70 per ounce Gold Trust (ARCA:GLD).
The transportation sector was back in the express lane during Tuesday’s trading session, as the Dow Jones Transportation Average advanced 0.51 percent to 7,549 (ARCA:IYT).
In Japan, the exchange rate for the yen remained the dominant factor in stock market activity. Japanese stocks declined as the yen strengthened to 102.15 per dollar during Tuesday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets, RYDEX CurrencyShares Japanese Yen (ARCA:FXY). The Nikkei 225 Stock Average retreated 0.36 percent to 14,423, iShares MSCI Japan (EWJ)).
Downbeat revenue forecasts for liquor sales spoiled the party in China, as a disappointing earnings outlook from the beverage sector offset enthusiasm about a possible relaxation of restrictions on foreign investments in the nation’s free trade zone. Although the Shanghai Composite managed to squeak ahead by a few basis points, investors in Hong Kong remained concerned about upcoming earnings reports from the banking sector. The Shanghai Composite Index rose 0.05 percent to 2,067, iShares FTSE/Xinhua China 25 Index (ARCA:FXI). Hong Kong’s Hang Seng Index declined 0.52 percent to 21,732, iShares MSCI Hong Kong (ARCA:EWH)).
Contrary to what you may have read elsewhere, America’s Consumer Confidence Index had nothing to do with Tuesday’s stock market advance in Europe. The Euro STOXX 50 Index was already close to the day’s high at 7:30 a.m. in New York. The Consumer Confidence Index was not released until 10:00. Please keep that in mind when you assess the credibility of those news reporters. The more plausible reason for investor bullishness in Europe is Tuesday’s assurance from European Central Bank President Mario Draghi to the effect that the ECB stands ready to implement accommodative monetary policy measures if deflation continues to threaten the region’s economy. The Euro STOXX 50 Index jumped 1.43 percent to 3,096 – crossing back above its 50-day moving average of 3,085. Its Relative Strength Index rose from 44.88 to 52.05, SPDR DJ Euro STOXX 50 (FEZ)).
Technical indicators revealed that the S&P 500 rose further above its 50-day moving average of 1,832 on Tuesday, after a 0.44 percent advance to 1,856. Its Relative Strength Index (RSI) climbed from 52.2 to 55.08. The MACD is on a level trajectory just below the signal line, suggesting that the S&P could remain in the 1,860 – 1,870 range during the immediate future.
On Tuesday, seven sectors advanced and two sectors declined. The consumer discretionary sector took the hardest hit, falling 0.60 percent.
Consumer Discretionary: SPDR Consumer Discr. Select Sector (ARCA:XLY): -0.60%
Technology: SPDR Select Sector - Technology (XLK): +0.61%
Industrials: Industrial Sector SPDR Trust (ARCA:XLI)): +0.91%
Materials: SPDR Materials Select Sector (ARCA:XLB): +0.55%
Energy: SPDR Energy Select Sector Fund (ARCA:XLE): +0.90%
Financials: Financial Select Sector SPDR Fund (ARCA:XLF)): -0.09%
Utilities: SPDR Select Sector - Utilities (XLU)): +0.42%
Health Care: SPDR - Health Care (ARCA:XLV): +0.89%
Consumer Staples: SPDR - Consumer Staples (ARCA:XLP): +0.73%
Bottom line: Although a better-than-expected, March Consumer Confidence Index was credited for Tuesday’ stock market advance, investors remained bearish on the consumer discretionary sector.
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