Stocks closed mixed Wednesday following a volatile session during which the focus was on the minutes from the June meeting of the Federal Open Market Committee. The minutes showed that members were divided over when to end bond purchases. About half felt that the program should end sometime late this year while others wanted a more gradual approach to terminating the plan.
In after-hours trading, stock futures gained following what appeared to be more dovish remarks by Chairman Ben Bernanke.
At Wednesday’s close, the Dow Jones Industrial Average was off 9 points at 15,292, the S&P 500 was unchanged at 1,653, and the Nasdaq rose 17 points to a new 12-year high at 3,521. The NYSE traded 670 million shares and the Nasdaq crossed 389 million. Advancers led decliners on the Big Board by 1.14-to-1, and on the Nasdaq, advancers were ahead by 1.4-to-1.
Both the Dow industrials and S&P 500, indices of generally higher quality stocks, have failed to break their June highs. Both charts, however, appear to be in the process of forming “V” bottoms following the sharp sell-off that resulted from the June Fed minutes and Bernanke’s remarks.
Conclusion: Both the Nasdaq and Russell 2000 have broken to new highs and led the market. However, the higher quality stocks, represented by the S&P 500 and Dow Jones Industrial Average, have failed to even exceed their June highs. Until those barriers, as well as May’s highs, are successfully attacked, we cannot conclude that the next leg of the bull market has begun.
Few markets have been led to new highs by the lower quality stocks. If this bull market is to resume, then the major indices should be recognized by institutional buyers. A demonstration of higher quality buying with greater volume could complete a breakout. But the mere formation of possible “V” bottoms is not enough evidence to draw long-term investors into the market.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.