Stocks pulled back for just the 2nd session out of 11 (and 4th out of 20!) – losses seemed somewhat strong but that is only because we have become used to stocks up almost every day and when they fall it is of the 0.1% variety. Economic news was quite bad for a second day in a row – in the past 2 days there have been about 9 economic reports domestically and 7 could be characterized as misses. And for all that you have the most minor of pullbacks. Today’s losses were not even due to the economic data (the market had been up much of the day) but due to comments from another Fed member about ‘tapering’ of QE purchases in the future - this is going to be a running theme go forward. The S&P 500 fell 0.5% and the NASDAQ .18% as a surge post earnings in Cisco Systems (CSCO) helped the latter.
Here is a sampling of the economic data today – a few years ago this sort of cocktail would have led to a -2% type of day.
Weekly jobless claims jumped,climbing at the fastest pace in six months, according to the Labor Department. Meanwhile, housing starts fell 16.5 percent in April to a 853,000-unit annual rate. Adding to woes, factory activity in the U.S. mid-Atlantic region unexpectedly contracted in May, according to the Philadelphia Fed index.
The S&P 500 and NASDAQ had what are called “inside days” – that is simply a day of rest in which the index did not go above the previous day’s high or low. In fact the S&P 500 has not traded below the previous days low since May 1, quite remarkable.
All in all, a lot of bad economic news this week but the market continues to march higher. A pullback to the most recent breakout area near S&P 1636 would actually be a nice change as these straight up moves with no consolidation create an unstable base to work from. But the index could fall all the way back to the major breakout level of 1597 and still be in a bullish pose.
The rotational nature of this market shows up in the NYSE McClellan Oscillator – even as the major indexes are mere points away from all time highs reached yesterday and at the top of their channels, we have a reading near 0 again. So we are getting corrections in sectors, but as one sector sells off, another takes it place – hence the indexes remain uber strong.
A great example of this is the biotechs which today took it to the chin – the sector ETF (IBB) was down 2%, far outpacing the market. If this market pattern continues in a few days they will be back to being leaders while something else corrects.
Here is the move in Cisco Systems (CSCO) today. This once technology leader ramped to levels last seen in 2010.
In the currency markets most of the attention has been in the swan dive of the yen but lately we’ve seen a rally in the dollar. In fact it’s back to peaks of summer 2012. A move over these levels would be an important trend change.
Meanwhile the very overbought 3D printing stocks took a break today as an analyst downgraded them - here are 3D Systems (DDD) and Stratasys (SSYS).
Both stocks were cut to Underperform from Market Perform by William Blair‘s Brian Drab this morning, writing that although he has a “positive outlook for the additive fabrication industry,” nevertheless expectations are too high for both companies. The shares fetch 45 and 49 times, respectively, his earnings projection for this year, which he notes is above long-term average multiples of 30 to 32 for both. Drab attributes health in the stocks of late to media frenzy about the trend to low-cost manufacturing, and the limited number of “pure plays” to invest in — DDD, SSYS, and The ExOne Company (XONE), and the companies themselves have contributed to that hype