First Solar, Goodyear Lead Loss in S&P 500 ETF
SPDR S&P 500 ( SPY ) fell 0.58% to $145.85. It’s shed 0.86% for the week.
PowerShares QQQ ( QQQ ), tracking the 100 largest nonfinancial stocks on the Nasdaq, up 0.14%, hung on to a 12-year high.
SPDR Dow Jones Industrial Average ( DIA ), down 0.13%, held near a five-year high.
IShares Dow Jones Transportation Average (IYT), off 1.09%, skidded further below its 200-day moving average, creating a bearish divergence for the market.
“The Dow Transports’ stubborn refusal to confirm new highs in the Dow Industrials is cause for concern, as the tail wind provided by money-printing from central banks will peter out if investors begin to anticipate an extended slump in corporate earnings,” Rich Moroney of the Dow Theory Forecasts wrote in a client note Friday. “Historically, the transports have been a good barometer for the health of the U.S. and global economy.”
Weakness in transportation stocks prompts concern in nearly all other sectors. Thomson Reuters has reported that profit estimates for all 10 sectors of the S&P 500 except financials have been reduced since July 1. “Negative earnings preannouncements for the September quarter are outrunning positive preannouncements by a 4-to-1 ratio, the worst showing since 2001,” Moroney wrote.
The bulls see the market rallying through the end of the year.
“The market will surely experience mini-corrections and pullbacks between now and the coming months,” said Adam Koos, president of Libertas Wealth Management Group in Columbus, Ohio, with $48 million in assets under management. “I expect to see positive momentum from the S&P 500 with a target north of 1,500 by year-end.
“The only caveat I can see would be a substantial geopolitical event in the Middle East with some shakiness towards the end of the year as we near the fiscal cliff.”
The rebound in housing and strength in the copper markets suggest the economy is on a growth path, said Kevin Marder, principal of Marder Investment Advisors in Los Angeles.
“Once (European Central Bank President) Mario Draghi made his announcement in late July, the lid on the market’s speculative sentiment was lifted,” Marder said. “And since the start of August, prices have settled into a very persistent uptrend as institutions began discounting two things: faster economic growth in 2013, and additional Federal Reserve accommodation.”
Major Stock Movers
Solar module maker First Solar dropped 5% as it failed to break above key overhead price resistance at its 200-day moving average. It’s been trending lower for 21 months and has cratered 71% in the past year.
Goodyear Tire fell 4.4%. KeyBanc Capital Markets downgraded its rating on this company from buy to hold.
Among the gainers in the major indexes,Expedia (EXPE) gapped up 3.75%, breaking out of a short cup base and hitting a new high. Deutsche Bank and Cantor Fitzgerald analysts rated the stock a buy, noting that the online travel site is in the early stages of a turnaround.
Seagate Technology (STX) rose nearly 3% as it tried to recover the 10-week moving average. The disk-drive maker lowered its revenue expectations and said the industry’s total shipments would undercut prior forecasts by 10%.