A sharp rally in the closing hour helped limit losses Thursday as we saw a pullback from a predictable technical position (more on that later). The S&P 500 fell 0.89% and NASDAQ 0.57% after both being down well over 1% earlier in the day. Weak economic data out of China was the “reason” for today’s selling as stocks started off the session quite weak, but again we were overbought technically and at a key resistance area. In fact, yesterday we wrote “Please note if you are short term trading the NASDAQ is now at the top of its range that it has ping ponged in for over a year.”
China’s factories lurched into 2014 at a reduced speed, with manufacturing activity falling to a six-month low. HSBC said that its “flash” measure of sentiment among manufacturing purchasing managers fell to 49.6 in January from 50.5 in December. January’s reading raises a red flag, as any number under 50 indicates a deceleration in the manufacturing sector.
Looking at the indexes, the NASDAQ has been the much better short term “tell” the past few months as we see whenever the index hits the top of its resistance line in purple, it stalls or pulls back. Today was a great example as yesterday we were right at resistance! The index pulled back to its 10 day moving average, where buyers stormed in.
Still solid readings in the NYSE McClellan Oscillator measure as we are solidly in the positive but not overbought.
Emerging markets are one area that have had a rough start to the year; there is some turmoil in Thailand that is not getting much attention plus weakness in China tends to spill over to a lot of other areas that people associate with emerging markets; here is the ETF for the group.
Oil had its second strong day to get back in the range it was a few weeks back, but mostly remains very range bound.
After the close Microsoft (MSFT) reported fiscal second-quarter profit rose 3 percent, as strong sales of its Office software to businesses offset another weak quarter for its flagship Windows system, which is suffering as consumers increasingly favor tablets over personal computers. The world’s largest software company reported a profit of $6.56 billion, or 78 cents per share, compared with $6.38 billion, or 76 cents per share, in the year-ago quarter. While nothing outstanding, it easily beat Wall Street’s average estimate of 68 cents and the stock is up 3.5% in after hours so if that holds should help a bevy of indexes tomorrow.
Battleground stock Herbalife (HLF) was back in the news today as Reuters reported a U.S. senator was calling for a probe of the nutrition company, which has been accused of running a pyramid scheme by hedge-fund manager William Ackman. If you are a cynic you might ask if anyone has investigating how much Ackman has contributed to said senators campaign…