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MARKET COMMENTARY - Thursday, October 02, 2014
The major averages kicked off October by suffering damaging losses on Wednesday. The Dow Jones Industrial Average, S&P 500 Index, and Nasdaq Composite Index collectively slumped well below their respective 50-day moving average (DMA) lines. The volume totals were reported mixed, lighter than the prior session total on the NYSE, but higher on the Nasdaq exchange, a sign of more worrisome selling pressure coming from large institutional investors. Breadth was negative as decliners led advances by more than 3-1 on the NYSE and nearly 4-1 on the NASDAQ exchange. There were only 6 high-ranked companies from the CANSLIM.net Leaders List that made new 52-week highs and appeared on the CANSLIM.net BreakOuts Page, down from the prior session total of 17 stocks. The new 52-week lows list expanded again and solidly outnumbered new 52-week highs on the NYSE and on the Nasdaq exchange. There were losses for all 10 high-ranked companies currently included on the Featured Stocks Page. Distributional action raised concerns while leadership (stocks hitting new 52-week highs) waned and a deteriorating market (M criteria) environment was repeatedly noted in this commentary. Remember that the fact-based investment system prompts disciplined investors reduce market exposure by selling any faltering stocks during rough market periods.
PICTURED: The S&P 500 Index fell 26 points to 1,946, slumping well below its 50-day moving average (DMA) line.
The NASDAQ dropped 71 points to 4,422 and the Dow declined 238 points to 16,804. Stocks finished lower for a third day amid a batch of mostly disappointing economic data. The ISM's manufacturing index dropped in in September from the highest level since early 2011 while euro zone factories expanded at the slowest pace in 14 months. A separate report showed construction spending fell by a more than anticipated 0.8% in August. On the upside, ADP reported companies added 213,000 workers to private payrolls in September, topping estimates for an increase of 205,000.
Nine of the 10 sectors in the S&P 500 retreated. Materials and industrials were the worst performing groups as Dow Chemical (DOW -3.8%) and General Electric (GE -1.8%) fell. Utilities advanced as investors sought out defensive issues, and Exelon (EXC +1.6%) posted a gain. Automakers were also in focus. The new General Motors Company (GM +1.7%) posted better-than-expected monthly sales figures , but Ford (F -1.3%) fell as it missed analyst estimates.
Treasuries staged a rally. The 10-year note rose 27/32 to yield 2.39%. The 30-year bond gained nearly two full points to yield 3.10%.
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The Oil Services Index ($OSX -2.52%) and Integrated Oil Index ($XOI -1.85%) both suffered large losses and led broad based declines on Wednesday. Financial shares were a negative influence on the major averages as the Broker/Dealer Index ($XBD -1.41%) and the Bank Index ($BKX -1.17%) fell. The tech sector saw unanimous losses from the Networking Index ($NWX -1.31%), Biotechnology Index ($BTK -1.27%), and the Semiconductor Index ($SOX -2.37%). The Gold & Silver Index ($XAU -0.12%) held its ground.
Charts courtesy www.stockcharts.com
PICTURED: The Retail Index ($RLX -1.23%) violated its 50-day moving average (DMA) line with a damaging loss, sinking near its July highs.