Stocks In Holding Pattern, Awaiting Delayed Data

Stocks remained near Friday’s closing levels on Monday, as investors awaited earnings reports, the non-farm payrolls report and other delayed data

Stocks failed to gain much ground on Monday, as investors awaited a number of economic reports, which have been delayed by the government shutdown. Tuesday brings the long-awaited, non-farm payrolls report for September. The ongoing flow of quarterly corporate earnings reports added to the suspense.

One bit of economic data which was not delayed was the September Existing Home Sales report from the National Association of Realtors. The report indicated a 1.9 percent decline in existing home sales from August’s downwardly-revised total, which indicated a seasonally-adjusted annual rate (SAAR) of 5.39 million homes, compared with the original August estimate of 5.48 million. The September SAAR fell to 5.29, missing estimates of a SAAR of 5.30. Inventory was unchanged at 2.21 million homes, indicating 5 months of supply.

The downward revision from August’s initial estimate of existing home sales combined with September’s disappointing SAAR to send homebuilder stocks falling. The iShares U.S. Home Construction ETF (ITB) sank 1.47 percent and the SPDR S&P Homebuilders ETF (XHB) declined 0.57 percent.

The Dow Jones Industrial Average (DIA) lost 7 points to finish Monday’s trading session at 15,392 for a 0.05 percent dip. The S&P 500 (SPY) ticked upward by 0.01 percent to steal another record-high close at 1,744.66 after hitting a new record intraday high of 1,747.79.

The Nasdaq 100 (QQQ) advanced 0.15 percent to finish at 3,920. Surprisingly enough, the Russell 2000 (IWM) declined 0.21 percent to close at 1,112.48 after hitting a record intraday high of 1,117.32.

In other major markets, oil (USO) sank 1.40 percent to close at $35.94.

On London’s ICE Futures Europe Exchange, December futures for Brent crude oil declined 14 cents (0.13 percent) to $109.80/bbl. (BNO).

December gold futures advanced $1.00 (0.08 percent) to $1,315.60 per ounce (GLD).

Transports continued their drive uphill on Monday, with the Dow Jones Transportation Average (IYT) climbing 0.34 percent.

In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Stocks made solid gains as the yen weakened against the dollar. A weaker yen causes Japanese exports to be more competitively priced in foreign markets. The yen fell to 98.08 per dollar during Monday’s trading session in Tokyo (FXY). Canon shares soared 1.4 percent. The Nikkei 225 Stock Average jumped 0.91 percent to 14,693 (EWJ).

In China, stocks soared after the State Council issued a press release detailing reforms, including measures to reduce overcapacity and to provide increased financial support for small businesses. The Shanghai Composite Index jumped 1.62 percent to close at 2,229 (FXI). Hong Kong’s Hang Seng Index advanced 0.42 percent to end the day at 23,438 (EWH).

As usual, events in the United States were reported as being the controlling influences in the European stock market, even though there was not much movement in the STOXX 50 index. We are supposed to believe that everyone in Europe is holding their breath in anticipation of the delayed September non-farm payrolls report. Please! Many investors in the United States aren’t concerned about that, so why would Europeans care? The true reason for the modest rise in European stocks was due to positive earnings reports from a number of key companies – whose names you wouldn’t recognize because they have no presence in American markets.

The Euro STOXX 50 Index finished Monday’s session with a 0.15 percent decline to 3,028 – remaining above its 50-day moving average of 2,875. Its Relative Strength Index is 71.05. Because most investors consider an RSI above 70 as an “overbought” signal, we could see another pullback (FEZ).

Technical indicators revealed that the S&P 500 inched further above its 50-day moving average of 1,681 after finishing Monday’s session with a 0.01 percent uptick to 1,744.66. Its Relative Strength Index rose from 65.89 to 65.92. The MACD climbed further above the signal line, suggesting the likelihood of a continued advance.

For Monday, only three sectors were in positive territory and six sectors were in the red. The healthcare sector took the hardest hit, falling 0.51 percent.

Consumer Discretionary (XLY): +0.26%

Technology: (XLK): +0.54%

Industrials (XLI): +0.25%

Materials: (XLB): -0.02%

Energy (XLE): -0.45%

Financials: (XLF): -0.20%

Utilities (XLU): -0.21%

Health Care: (XLV): -0.51%

Consumer Staples (XLP): -0.22%

Bottom line: Investor anxiety about quarterly earnings reports as well as the backlog of economic reports – headed by the non-farm payrolls report – kept stocks close to Friday’s closing levels.

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