The markets ho hum attitude took a bit of a hit today; Friday we wrote “Technically until we see some sort of high volume selloff that breaks the current trend there is no change in the outlook.” Today was one of those days that one should at least recognize as potentially important. It actually started as a very quiet session until a heavy bout of selling hit in mid afternoon on “Fed talk”; the S&P 500 fell 1.26% and the NASDAQ 1.47%. So thus far 2014 has been a bit of a dud.
Stocks declined to session lows after a speech Monday afternoon by Atlanta Federal Reserve President Dennis Lockhart, in which he said that if all goes as expected, the central bank would continue to taper its monthly bond purchases.
Both indexes are now back to their 20 day moving averages; the last time they were here they were rocketing upwards through them the afternoon the Fed surprised with its $10B reduction in quantitative easing.
Ten year yields continued to falter, as the jobs data continued to weigh.
While the indexes didn’t have what we call a “bearish engulfing” day – one where a stock or ETF goes over the previous day’s high but closes below the previous day’s low, this did occur in the transportation sector which has been super hot of late.
Energy and consumer discretionary sectors were also notable in their weakness. The former broke below its 50 day moving average in a convincing manner, while the latter broke through its 20 day moving average to come within spitting distance of its 50 day.
One name that stood out today was mega drug firm Merck (MRK). A preliminary review posted on the U.S. Food and Drug Administration’s web site had the agency citing “robustly positive” clinical trial results in saying its blood clot preventing drug vorapaxar should be approved.