Wall Street ends strong January on flat note
Wall Street closed its best month since October on a flat note on Tuesday as weaker-than-expected economic reports surprised investors after a stream of positive data in recent months.
Stocks have rallied sharply since late last year, partly on hopes the U.S. economy will dodge the effects of a recession in Europe. But data tested that theory on Tuesday, with U.S. home prices and business activity in the U.S. Midwest missing expectations and consumer confidence dropping unexpectedly.
However, the market reversed much of its losses that came after the publication of the data, continuing a pattern that has marked recent trading and is being seen as a sign of resilience. The S&P 500 has fallen for four days, but the losses amount to little more than 1 percent.
Once you start to get some negative numbers, especially around the consumer, it lends to the argument that GDP growth is not really there and it is going to go back to zero, said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
Earnings reports continue to paint a muddled picture. Exxon Mobil Corp
The Dow Jones industrial average <.DJI> dropped 20.81 points, or 0.16 percent, to 12,632.91. The Standard & Poor's 500 Index <.SPX> fell 0.61 points, or 0.05 percent, to 1,312.40. The Nasdaq Composite Index <.IXIC> gained 1.90 points, or 0.07 percent, to 2,813.84.
Volume was light for most of the day but surged late as managers adjusted portfolios at the end of the month. About 7.07 billion shares traded on the NYSE, Amex, and Nasdaq. That compares to the 200-day moving average of 7.76 billion shares.
Robert Sluymer, a technical analyst at RBC Capital in New York, said depressed U.S. interest rates and a stalling of gains in industrial metal copper is pointing to a short-term reversal in economically sensitive sectors, such as materials and banks, that have led the rally.
More evidence of the pullback or pause continues to develop, led by banks, with global growth themes, represented by copper, just beginning to pause under resistance at its 200-day moving average, he wrote in a research note. Bond yields have still yet to confirm the pro-risk rebound.
Pharmaceutical wholesaler McKesson Corp
According to Thomson Reuters data, of the 204 companies in the S&P 500 that have reported results so far, 59.8 percent topped estimates, tracking below the beat rate at this stage of the earnings season in recent quarters.
Hopes that Greece would reach a deal with private creditors on a debt swap and receive a bailout to sidestep a chaotic default boosted market sentiment initially.
Shortly after the opening bell, the S&P 500 triggered a bullish technical signal, known as a golden cross, as its 50-day average ticked above its 200-day average. The signal indicates a shift in mid-term momentum and usually means gains in the index six months down the road.
Out of 26 golden crosses since 1962, the S&P 500 gained an average 4.1 percent over the next three months and was positive 73 percent of the time. Over the next six months it gained 6.6 percent and was positive 81 percent of the time, according to Birinyi Associates.
The S&P 500 gained 4.4 percent in January, its best month since October. The Dow is up 3.4 percent in it fourth straight month of gains, and the Nasdaq is up 8 percent.
The flat close with wide intraday moves in both directions describes a longed-legged doji pattern on a Japanese candle stick chart and is seen as a sign of uncertainty and indecision on the part of investors.
Results from drugmaker heavyweights Pfizer Inc
and Eli Lilly & Co
Lilly edged up 1.2 percent $39.74 and Pfizer dipped 0.8 percent to $21.40.
Transportation stocks dipped as United Parcel Service Inc
Housing stocks fell after the S&P/Case-Shiller report on U.S. home prices. The PHLX housing index <.HGX> dropped 1.4 percent and the Dow Jones U.S. home construction index <.DJUSHB> declined 1.7 percent. Lennar Corp
(Editing by Padraic Cassidy)
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