Investors returned from the three day weekend to a bout of selling. While the major indexes were down materially - the S&P 500 0.45% and the NASDAQ 0.87%, the variation today between the DJIA (down fractionally) versus the Russell 2000, full of small cap stocks, (down 1.34%) told the story of the past few weeks. Unlike the beginning to middle part of this rally - mid November to mid February, the last six weeks have been about the stodgy, conservative stocks. Today's decline was mostly at the hands of a poor ISM Manufacturing report, which was down sharply month over month with a reading of 51.2 versus last month's 54.2 While anything over 50 is still expansionary this is quite a reduction.
Some good economic data out of the housing market was offset by more drama from Cyprus as the stock market had a volatile day that was not reflected in the closing averages prices. Stocks shot out of the gate and were supported by a release of the housing data then began to slowly sell off. That selling accelerated mid day when a Bloomberg story hit that the finance minister in Cyprus was set to resign. Then in a now familiar story over the past 5 years, comments out of a central bank helped lift stocks - this time the ECB said it was willing to provide liquidity to Cyprus. Why this was a surprise to anyone is a strange question but it was enough to drive stocks up well off their lows. In the end the S&P 500 fell 0.24% and the NASDAQ 0.26%. Most of the gains however were in the safety sectors once more - more on this later.
The Dow's winning streak finally came to an end Friday as the DJIA suffered its first loss of the month, albeit a minor one of 0.17%. Meanwhile the S&P 500 and NASDAQ dropped 0.16% and 0.30%. It was a quiet session as the market seems to be in a bit of a zombie mode. The only major economic reports were consumer prices (the highest in 3 years) and a consumer confident report. Both were not what the market wanted - the only thing in theory that would slow down the Fed other than a return to good employment numbers is high inflation. That said a lot of the increase was due to gasoline hikes and the Fed tends to ignore food and energy and focus on what is called core inflation. And the consumer confidence numbers came in quite low versus expectations (and the lowest since Dec 11); that said this figure normally does not mean much to the market other than for a few hours.
Very similar to many sessions in 2013, early morning selling led to buyers showing up and stocks finished near their highs of the day. There has been a relentless bid to the market since the 3% correction as the S&P 500 has been up 7 sessions in a row. The S&P 500 gained 0.32% and the NASDAQ 0.26%. The news flow was very quiet on the day economically, and for the near term it seems technicals will dominate unless Europe flares up.
A late day bounce pushed stocks well into the green after the morning began well in the red due to some weakness overseas, especially in China, which had its worst day in two years due to additional government property controls to try to slow down the real estate market. The market does remain resilient even as small caps have lagged for a few weeks and defensive sectors have taken over the leadership of late. While the bounces are coming on light volume, and the selloffs on high volume in the end the price is the price and its not rolling over. The S&P 500 gained 0.46% and the NASDAQ 0.39%.