By Anora Mahmudova and Barbara Kollmeyer, MarketWatch Energy
sector stocks sell off
NEW YORK (MarketWatch) -- The U.S. stock market struggled to
sustain early morning gains, as a continued sell-off in energy
stocks due to falling oil prices weighed on the S&P 500.
The S&P 500 (SPX) and the Dow Jones Industrial Average (DJI)
hit intraday record highs in early trade, but erased gains by later
in the morning. Heavy declines among major oil companies dragged
the S&P 500 down.
The Nasdaq Composite (RIXF) was trading slightly higher to
flat.
Beyond oil concerns, some industry watchers have been fretting
about the markets rapid runup in stocks so soon after turbulence in
October, which sent U.S. stocks sliding.
Record levels on the S&P 500, however, is sparking a debate
among strategists, who have been consistently talking about the
index's fast recovery from the pullback last month. In just 12
sessions, the index, which fell nearly 10% on an intraday basis,
has bounced back from the bottom it hit on October 15. Low
volatility and bullish investor sentiment are among five red flags
that the stock market's record run is raising for some.
Nour Al-Hammoury, chief market strategist at ADS Securities,
said the U.S. market is "heavily overbought" and he expects another
short-term pullback in the next few days, especially without big
economic data. Support levels to watch on the S&P 500 include
2,024, then 2,019, with a break of both leading to the 1key
psychological barrier of 2,000, he said.
For the Dow industrials, Al-Hammoury is watching support at
17,408 and then 17,350. "We still believe that the current high
could well be the last 'false' rally before the major correction,
similar to what happened after the end of QE1 and QE2. Therefore,
selling rallies remains our short term preferred strategy," he said
in a note. Read: Don't get suckered by stock market's winning
streak
Meanwhile, Michael Arone, chief investment strategist at SSGA's
US Intermediary Business Group, said that the underlying trends,
such as solid earnings and improving economy, have been driving the
market higher in the past few weeks.
"In this environment, PE ratios are likely to expand and drive
markets higher in the short-term. Falling oil prices along with
stronger dollar, low mortgage rates and solid job gains will result
in increased consumer spending. We will be watching Friday's retail
sales very closely to see if that is the case," Arone said.
Need to Know: Alibaba smacks of Twitter and how to ride the
closing ramp to profits
Weekly jobless claims and retailers: The number of people who
applied for unemployment benefits last week posted the biggest
increase in two months, but initial claims are still exceedingly
low amid an uptick in hiring and relatively few layoffs.
Labor market data watched closely by the Federal Reserve - JOLTS
showed an increase in quit rates and hiring. Job openings fell in
September, but only because hiring hit its highest level in over
six years. Next on the data calendar is the October Federal budget
at 2 p.m. Eastern.
Retailers are going to be in the spotlight, with Wal-Mart shares
rose (WMT) after third-quarter earnings and sales beat
forecasts.
Kohl's Corp. fell (KSS) after sales and earnings missed
forecasts for the third quarter. Nordstrom Inc. (JWN) will also
report. Read Movers & Shakers
Shares of J.C. Penney slid (JCP) after third-quarter sales
missed already reduced expectations, though its loss was smaller
than expected.
Warren Buffett agreed to acquire the Duracell battery business
from Procter & Gamble Co. in a deal valued at $4.7 billion.
Shares of Procter & Gamble were little changed.
Cisco Systems Inc. (CSCO) rose after the network-technology
company posted quarterly results that topped forecasts.
Viacom Inc. (VIA) rose after reporting fiscal fourth-quarter net
profit of $732 million, or $1.72 a share, compared with earnings of
$804 million, or $1.68 a share, in the year-earlier period.
Deal talk was driving a 16% gain for shares of DreamWorks (DWA)
after The Wall Street Journal said toy maker Hasbro Inc. (HAS) is
in early talks to buy the animation studio, citing persons familiar
with the matter. Hasbro shares fell.
No letup for oil prices: Crude(CLZ4) continued to fall, down
nearly 3%, in the wake of comments by Saudi Arabia's oil minister
on Wednesday. Gold(GCZ4) made marginal gains, but was kept in check
by the dollar(USDJPY), which stayed well above Yen115. The yen also
fell as Japanese stocks extended a three-day winning streak, with
the Nikkei 225 hitting a seven-year high.
European stocks tracked global stocks higher, with the FTSE 100
also advancing. Read: European stocks could be gearing up for a big
rally.
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