After a nominally higher opening indication from the futures market this morning, stocks started out sharply lower. One theory for the downward move was attributed to some kind of computerized sell program hitting right at the start of the trading session.
The DOW declined to a fast loss of 88 points from which it recovered by 10 AM. Then it slipped again and wound up with a 22 point loss on the day. It was a classic case of a few large stocks bringing the index lower. GS fell after its earnings report beat the estimates. UNH dropped nearly 3 points to close at 157 following its good report on Tuesday. The energy stocks, CVX and XOM, ended lower in today’s session because of a decline in the price of crude oil.
Due to the large influence of these few stocks on the DOW in a negative way, the S&P 500 was held back from gaining more than the 4 points it added today. The NASDAQ eked out a gain of 16 points to close at 5555. The Russell 2000 Index of small stocks added 6 points today. Breadth numbers were slightly positive at a 16/15 upside ratio. The VIX climbed 5% to 12.48.
Economic reports showed that December industrial production rose by 0.8%…its highest level in two years. This increase does show the overall strength in the economy. Capacity utilization remained at 75.6%. The December C.P.I. was ahead by 0.3%, its fifth straight advance and was higher for the entire year of 2016 by 2.1%. These numbers should make the Fed happy that it has justified its interest rate increases due to a slight pickup in inflation. The January National Association of Homebuilder’s Sentiment Index slipped a bit from its December high but still remains at its best level in several years.
Donald M. Selkin
These are excerpts from Don Selkin’s Daily Market Notes, abbreviated and updated with permission from the author. Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analyses concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, Recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: Bloomberg Financial, Reuters, and the Associated Press.