It was another quiet session and sort of the exact opposite of yesterday; today the market gapped down and stayed in a narrow range - whereas yesterday the market gapped up and stayed in a narrow range. The S&P 500 fell 0.32% and the NASDAQ 0.20%. Most of the action was in very specific niches of the market, such as social media. News flow remains quiet. Next Tuesday and Wednesday the Fed has its last meeting of the year and some media types are saying they might taper but one would doubt Bernanke would do this at the end of his reign and just ahead of the holidays.
Stocks were mixed again Tuesday as the S&P 500 fell for the 4th straight session. What looked like a promising intraday reversal petered out in the last hour as stocks sold off quite sharply erasing decent gains. The S&P 500 fell 0.26% while the NASDAQ gained 0.08%. Financials continue to be an issue as the Wall Street Journal reported that JPMorgan has offered to pay $3 billion to the Justice Department to settle a number of pending probes, including a case relating to the sale of residential mortgage-backed securities from 2005 to 2007. This weighed on the sector.
After the sharp advance the first few weeks of this rally, we've turned to a slow grind up in the past week and a half. Markets shrugged off an earnings disappointment from McDonald's (MCD) to inch up 0.2% for the S&P 500 and 0.36% for the NASDAQ. Economic data was light with existing home sales the main figure:
Existing home sales in June slipped 1.2 percent in June to an annual rate of 5.08 million, according to the National Association of Realtors, missing expectations for a reading of 5.25 million units. Still, the reading was still the second-highest level of sales since November 2009.
The focus this week will be on earning reports with the Fed finally sidelines for a week and economic data very light. Many of the big wig names like Apple, Caterpillar, Amazon, Facebook, etc will hit this week.
Many eyes today were on Bernanke's testimony to Congress but the guy said just enough to not add anything new to the discussion. Which at this time is exactly what the market wants. After entering the week in extremely overbought conditions we are seeing exactly what bulls want and that is consolidation / sideways movement. Either we can correct overbought conditions via lower price OR time - the more bullish answer is time, which is what has happened this week. Today the S&P 500 gained 0.28% and NASDAQ 0.32%, essentially offsetting yesterday's losses. This marks the third day of marking time.
"Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," according to Bernanke's prepared remarks to the U.S. House of Representatives Financial Services Committee. Bernanke said the pace of asset purchases could be reduced "somewhat more quickly" if economic conditions were to improve faster than expected. On the other hand, the current $85 billion monthly pace "could be maintained for longer" if the labor market outlook darkened, or inflation did not look like it was rising back toward the Fed's 2 percent goal.
Quick Note from Blain: Heads up! Tomorrow we will be sharing a link to our Q2 2013 Reader Satisfaction Survey. Please keep an eye out for it, thanks!
We mentioned yesterday how there was a potential resistance area in the 1640ish area and it was possible that it would be broken via gap up as almost the entire move since the June lows has been in the premarket. Well that happened today, as we had yet another day where the market gapped up, traded in a range all session, but essentially finished where it started with all the gains coming in premarket. A very strange situation and I cannot remember an entire 10 day rally (sans last Friday with the employment report) being done in premarket. The S&P 500 added 0.72% and NASDAQ 0.56%.