New Highs Increase Despite Mild Distributional Pressure
The major averages negatively reversed on Thursday after encountering resistance near their prior chart highs. Volume, an important indicator of institutional sponsorship, was higher than Wednesday's session which marked a distribution day for the NYSE and the Nasdaq exchange. Advancers and decliners were evenly matched on the NYSE and on the Nasdaq exchange, but the NYSE had a slightly positive bias while the Nasdaq had a slightly negative bias. New 52-week highs outnumbered new 52-week lows on the NYSE and the Nasdaq exchange.
U.S. stock futures were pointing to a weak open Friday after the government said economic growth slowed last quarter.
Stocks struggled Thursday as mixed earnings reports offset a better-than-expected decline in initial weekly jobless claims.
The Department of Commerce estimated that gross domestic product -- a measure of goods made and services rendered in the U.S. -- expanded by an annual rate of 2.4% during the second quarter, compared to 2.5% in the first quarter. Economists had expected the economy to have grown 2.5%, according to Briefing.com.
Hong Kong's Hang Seng slipped 0.3%, and Japan's Nikkei fell 1.6%. The FTSE in London was losing 0.4%, while the DAX in Frankfurt was down by 0.5%.
Chicago's Institute for Supply Management will release its purchasing managers index at 9:45 a.m. ET. Economists anticipate that the measure of manufacturing activity in the Chicago region fell to 56.3 from 59.1 in June.
The Thomson Reuters/University of Michigan will release an updated consumer sentiment report for July at 9:55 a.m. The index is projected to increase to 67.5 from an earlier reading of 66.5.
In earnings news,
Merck (MRK) reported better-than-expected results for the second quarter. The drugmaker and Dow component said its profit was 86 cents a share, excluding certain items, beating the 83-cent estimate of analysts surveyed by Thomson Reuters.
Honda (HMC) said its fiscal first-quarter profit soared to 272.49 billion yen ($3.15 billion) from 7.56 billion yen a year earlier. The Japanese carmaker said it expects to earn 455 billion yen in the year ended in March, an increase from its earlier forecast of 340 billion yen.
Crude oil for September delivery was down by 55 cents, at $77.81 a barrel.
The December gold contract was trading $2.40 higher at $1,173.60 an ounce.
The dollar was trading higher against a basket of currencies, with the dollar index up by 0.3%.
The benchmark 10-year Treasury was up by 13/32, diluting the yield to 2.941%.
Several high profile technology stocks got smacked after Akamai Technologies Inc. (AKAM
-12.90%), Nvidia (NVDA
-9.87%), and Symantec Corp. (SYMC
-11.18%) released weak Q2 results. Financial shares fared reasonably well for the most part after New York Attorney General Andrew Cuomo began a fraud probe into the life insurance industry and subpoenaed several well-known firms.
Elsewhere, the Labor Department said jobless claims fell last week and confidence improved about Europe's economy. Stocks turned tail after James Bullard, President of the Federal Reserve Bank of St. Louis, said the central bank should resume purchases of Treasury securities if the economy slows and deflation sets in. On Friday, the US government is slated to release Q2 GDP figures which will give investors the latest read on the economy.
The major averages are still above their respective 2-month downward trendlines which is a healthy sign. However, the Nasdaq Composite, NYSE Composite, and the benchmark S&P 500 indexes collectively closed below their respective 200-day moving average (DMA) lines which is not ideal. In order for a new leg higher to begin, the major averages will have to ratchet above their longer term averages and close above their recent chart highs which currently serve as the next levels of resistance to watch. The window remains open for for high-ranked stocks to be accumulated when they trigger fresh technical buy signals. Trade accordingly.
