Stock Market Gives Back Early Gains In Typical Bearish Action – Investor's Business Daily

U.S. stock indexes reversed lower midday Monday but McDonald’s (MCD) padded its bullish move to 5%. Also, Apple (AAPL) and several top-rated market leaders posted gains.

X

The Dow Jones industrial average was barely below the break-even line, after being up almost 0.8% earlier. The Nasdaq and the S&P 500 fell 0.5% and 0.3%, respectively, after wiping out earlier gains.

Volume in the stock market today was running behind Friday’s pace at the same time of day.

The major indexes have been encountering resistance at their 50-day moving averages over the past six to seven sessions. If the stock market is to shake off the negative pressure, retaking the 50-day line is an important first step.

The price of crude oil hit the highest level since January, up 91 cents to $69.01 a barrel. Israeli Prime Minister Benjamin Netanyahu on Monday said files obtained from Iran prove Iran has a secret program to build nuclear weapons.

Among market watchers, the recent worry is the narrowing of the spread between the 10-year yield vs. the 2-year yield. But the problem with using the yield curve for market guidance is that “recessions typically haven’t begun until 20 months after the curve inverts,” as IBD’s cover story “The Big Squeeze” pointed out.

And not every economist agrees that yields should be the top focus right now. Johns Hopkins University economist Steve Hanke argues that the broad money supply as measured by Divisia M4 is a better guide to the economy. So far this year, Divisia M4 grew 4.8% in January, and 5% each in February and March.

Hanke calls that kind of growth “not bad” and points to an economy where “everything is running pretty smoothly.”

Focus On What’s Happening

Then what’s bothering the stock market? It’s much more useful to focus on what’s happening than to search for causation. Individual investors should closely follow the charts for the Nasdaq and S&P 500.

What are they showing?  The choppiness that began in early February is still in place.

On Monday. leaders advancing included Mastercard (MA), up 1.4% in below-average volume; retailer Canada Goose (GOOS), up 1.9%; and software security provider Mimecast (MIME), up 1.4%. Price gains and volume were stronger earlier in the day.

Mastercard will report Q1 results Wednesday before the market’s open.

On the downside, Marathon Petroleum (MPC) dived 7% after an earnings miss.

McDonald’s Surges

McDonald’s helped the Dow Jones industrial average stay in the leadership spot. The Dow stock rose on a strong quarterly report. Earnings increased 22% vs. the year-ago quarter.

The Street expected a 14% gain. Q1 revenue dropped 9%, but analysts expected a 12% decline.

McDonald’s 5% gain hoisted the stock over its 50-day and 200-day moving average lines.

The stock is basing in a 18%-deep consolidation. McDonald’s is 7% under a high marked in late January.

Meanwhile, Apple advanced 1.7% gain as the stock fought to retake its 200-day line.

Economic Data

Personal income for March checked in at 0.3%, just under an expected 0.4% gain. Consumer spending was in line with the consensus estimate of 0.4%, according to Econoday.

The Chicago purchasing managers gauge for April rolled in at 57.6 vs. the consensus view of 57.8.

Pending home sales for March missed expectations. The reading was 0.4% vs. estimates for 1%.

The Dallas Federal Reserve’s manufacturing survey for April came in stronger than expected. The general activity index came in at 21.8 vs. the consensus estimate of 18. The production index hit 25.3. The prior reading was revised to 14.4. Readings below zero point to contraction while those above zero point to growth.

RELATED:

Defense Matters When Swing Trading In A Choppy Market

5 Retail Or Apparel Stocks That Investors Should Track

The Stock Indicator That Is Like A Canary In The Coal Mine