Market Consolidates Gains, Looks For Reset

After yesterday’s 300-point session, it wasn’t a surprise that the market pulled back; however, the session had its moments when the buy-on-dips crowd made its move. 

Technology was higher, led again by semiconductor stocks, including Advanced Micro Devices (AMD). Healthcare stocks eked out a slight gain as UnitedHealth Group (UNH) continued to move higher; the company had monster earnings that beat big time. Also, there is a lot of speculation on the next big biotech takeover.

The overall market breadth was ugly:

• NYSE: 2,157 decliners to 826 advancers. The number of stocks hitting 52-week lows swelled to 93 while 180 names hit new highs
• NASDAQ:1,860 decliners to just 1,068 advancers, with 168 new highs against 44 new lows. Interestingly, the NASDAQ actually had more advancing share volume than declining, which explains why the index was higher for most of the session

Crude Reality

We got the latest on crude oil inventories, which decreased for the ninth consecutive week, hitting the lowest level since February 2015.

Global producers, which includes Venezuela (has OPEC’s largest proven reserves), see a declining output. There is room for U.S. producers to turn on the spigot and still enjoy slightly higher prices. Crude oil made a major breakout with a close through $64.50.

Some investors fear inflation implications of such a move while others are simply concerned that the market has come too far, too fast. It’s time to lighten up in order to change risk-reward dynamics. 

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After the close on Thursday, a couple of stocks that had been hot reported results that beat Wall Street, but shares were getting slammed. International Business Machines (IBM) and American Express (AXP) were considered ‘dogs of the Dow.’ What approach is being taken to find value in this market? I don’t like those gimmicks but when enough people do, they work for short periods of time.

Ironically, IBM finally snapped 23 consecutive quarters of year-to-year revenue declines.

Shutdown Madness

This morning, we will get the results from last night’s Senate vote on a continuing resolution (CR) to keep the government open for a few more weeks. During which time, they will find an answer to the ‘Jacobian Conjecture’ (probably not), and come up with a deal of compromise on several issues surrounding immigration and military funding.

Then there will be another CR.

Of course, this isn’t unusual (2001 saw 21 continuing resolutions) and we are on the cusp of the fourth this fiscal year. I don’t think it hurts the market. While there is work that suggests cuts up to 0.2% off the Gross Domestic Product (GDP), it’s never been an economic disaster. Heck, if the GOP would embrace the idea of draining the swamp, a shutdown would take the nation across the Rubicon from a bloated government.  

However, I doubt that will happen.