Stocks were afflicted with a case of the weak volume blues on Monday as just 5.8 billion shares changed on the American Stock Exchange, Nasdaq and New York Stock Exchange combined. The Dow Jones Industrial Average was in positive territory for part of the day, but closed lower by one point to settle at 10302.01, extending its losing streak to five days. The S&P 500 finished the day higher by a scant 0.13 points to close at 1079 while the Nasdaq led the way among the major indexes, adding 8.4 points to settle at 2181.87. By comparison, the Russell 2000 was impressive, adding almost six points to close at 615.10.
Overall, it was a boring day for equities, but the same cannot be said for metals futures and the materials sector. Disappointing growth data from Japan and lingering concerns about a double-dip recession and U.S. growth propelled gold to a six-week high. Gold was also helped by a slumping U.S. Dollar. The U.S. Dollar Index, which measures the greenback's strength against six other major currencies, traded down by as much as 0.9%, ending a five-day winning streak. That helped gold trade in a range of $1216.20 to $1229.5 an ounce before settling at 1226.20 an ounce, up $9.60 for the day.
Copper, like gold, was buoyed by the weaker dollar as the red metal finished higher in both the London and New York sessions. For the all the concerns about the global economic recovery, copper has been resilient as of late and demand apparently is not drying up as highlighted by a Bloomberg report that said orders to draw copper from stockpiles surged the most in two months today.
Positive comments on commodities from Goldman Sachs (GS) did not hurt the metals complex today. Goldman said rising demand from emerging markets and limited supply growth will prop up commodities prices through the end of 2010. In its forecast, Goldman favored copper, gold, oil, platinum and zinc in alphabetical order.
Goldman has an ''overweight'' weighting on commodities and expects gold to rise to $1260 an ounce in three months and to $1300 an ounce in six months. The bank thinks oil will be trading at $92 a barrel in three months. Goldman put a six-month price target of $7925 a ton on copper and that was good enough to lift the red metal today.
The Goldman commodities outlook helped most mining and materials to some fair gains on Monday. Freeport McMoRan (FCX), the largest publicly traded copper producer in the world, added 0.8%, but volume was less than half the daily average. BHP Billiton (BHP), the world's largest mining company, gained almost 1%, but again, volume was less than half the daily average. Gold miner Newmont Mining (NEM) added nearly 2%, but it is hard to get excited about that when the stock traded just 3.5 million shares compared to average daily volume of almost 8.6 million shares.
Nemont Mining Chart
Tech stocks saw a bit of relief on Monday and in testament to how lethargic the action was on Wall Street today, tech was the top-performing sector among the industry groups tracked by the S&P 500, gaining a mere 0.4%. Cisco (CSCO) was the Dow's biggest winner, adding 2.6%, representing only a slight rebound from last week's big tumble. Ebay (EBAY) also jumped 2.6% on news that its PayPal electronic payments unit is in discussions to have its services added to Google's (GOOG) Android smartphone platform. Android users would be able to use PayPal to pay for new apps.
None of that news is particularly exciting, nor is an acquisition of just $1.15 billion, but that is the news that Dell (DELL), the third-largest maker of personal computers, graced investors with today. Between Apple's (AAPL) dominance, the management shakeup at Hewlett-Packard (HPQ) and Cisco's earnings disappointment, it has been easy to forget about Dell lately. Well, there have been multiple to reasons to have ignored Dell for months, if not longer, but that is a conversation for another day.
On Monday, Dell said it would purchase data-storage firm 3Par (PAR) for $1.15 billion, paying $18 per share in cash, a whopping 86% premium to where 3Par closed on Friday. Dell is using the deal to bolster its footprint in the corporate technology market. Including the 3Par purchase, Dell has made five acquisitions this year in an effort to move away from PCs. The 3Par buy certainly helps Dell in that effort, but analysts speculated that the deal will only have a negligible impact on Dell's bottom line and that the Texas-based company is paying a steep price for 3Par.
3Par has reported three consecutive quarterly losses and one analyst said that Dell needs to integrate its acquisitions in more expeditious fashion, but the 3Par deal is not likely to result in speedy integration. In others, there is not much to be excited about when it comes to Dell.
In other news from the world of large-caps that have seen better days, Lowe's (LOW), the second-largest home improvement retailer, said its second-quarter profit jumped 10% to $832 million, or 58 cents a share, from $759 million, or 51 cents a share, a year earlier. Revenue increased 4% to $14.36 billion, but that fell short of the company's estimate. Analysts were expecting Lowe's to post a profit of 59 cents a share on sales of $14.52 billion.
North Carolina-based Lowe's raised the low end of its full-year guidance, but trimmed the top end, saying it now expects to earn $1.38 to $1.45 a share this year, compared with previous guidance of $1.37 to $1.47 a share. The company also pared its revenue outlook to growth of 4% from growth of 5% to 7%. That would equal sales of $49.11 billion compared with previous guidance of $49.58 billion to $50.53 billion. Analysts are currently forecasting a full-year profit of $1.42 a share on sales of $49.57 billion.
Despite those cuts to the full-year outlook, Lowe's was able to muster a small gain on the day on strong volume, but I would expect Home Depot's (HD) earnings on Tuesday to be a similar non-event.
As I have mentioned a couple of times already, it was a slow day for stocks, but one glaring exception would be for-profit education providers. Companies like Career Education (CECO), Corinthian Colleges (COCO), Strayer Education (STRA) and Washington Post (WPO), which owns Kaplan, were hammered on that students are not repaying their federal student loans.
According to Bloomberg News, Corinthian, Career Education and Washington Post manage campuses where less than 20% of federal student loans have been repaid. The national repayment average at traditional public and private universities is 55%, but at for-profit schools, that number dips to just 36%. Washington Post shares slumped more than 8% on the news and Career Education finished the day lower by by more than 6%.
Those losses seem tame in comparison to the more than 18% drop suffered by Strayer. Nearly 2.7 million shares changed hands in that name compared with average daily trade of less than 194,000 shares. The biggest loser in the group was Corinthian, which slid by almost 22% on volume that was roughly 11 times the daily average. Barclays downgraded the stock to ''equal weight'' from ''overweight'' while BMO Capital Markets trimmed its rating to ''market perform'' from ''outperform.''
Corinthian Colleges Chart
Looking at the charts, not much has changed since Friday. The S&P 500 still needs to deal with resistance at 1087, also the 50-day moving average, before1100 and the 200-day line at 1115 can be discussed. On the downside, 1050 remains the support area to watch, and from there things get dicey with a drop to the 1015 area a possibility if 1050 is violated.
S&P 500 Chart
The Dow traded below its 50-day line at 10,273 today with an intraday low of 10,209, but index was able to close above that moving average, but still needs to contend with resistance at 10,350. Volume is so anemic that it is tough to be bullish on the Dow and if financials do not start showing some signs of like sooner rather than later, we could be looking at 10,100 if 10,300 does not hold as support.
Despite today's ''rebound,'' there is still little reason to be involved with tech. Research In Motion (RIMM) shed 5% today on news of weak Torch sales. Semiconductor names have been hammered and Cisco failed to impress last week. The Nasdaq lost more than 5% last and could not reclaim even a half percent of that on Monday. Resistance lies around 2227, also the 50-day moving average. Support is 2140.
Like the Nasdaq, the Russel 2000 suffered a major loss last week (6.3%), so Monday's small gain is nothing to get excited about. The Russell 2000 would probably need to move back above 640, which is in between the 50- and 200-day moving averages before there is any reason to be constructive on small-caps. If support at 590 does not hold, then 550 could be retested and that neighborhood has not been seen since late 2009.
Russell 2000 Chart
In the hunt for strong sectors, I keep finding my way back to materials, but I wonder how long that party can last on weak volume. The reality is materials stocks are not setting the world on fire, they are merely booking small gains when other sectors decline. With financials and tech being slammed, I would not be rushing into any long positions because those two sectors account for more than a third of the S&P 500's weight. The broader market is not going higher without help from at least one of those sectors, but both will need to get their respective acts to boost the market in the fourth quarter.