Bulls on Thursday could not overcome a poor Tesla (TSLA) earnings report, states Jon Markman, editor of Strategic Advantage.
They finally gave ground to bears. The Nasdaq 100 closed at 12,986, a decline of 0.8%. The decline breaks a five-day string where the benchmark NDX started weaker, then miraculously recouped most of the losses into the close.
Bulls should not get too worried, though. Even with the loss on Thursday the NDX is still above its first support level at 12,919, the rising 20-day moving average. There is more important down at 12,552, the 50-day marker. This context is important.
Earnings reports are coming in weaker, however, the uptrend for the benchmark is on solid footing. A decline to 12,500 would merely be a pullback in a larger uptrend, not the apocalyptic event bears have been promising. The problem bears have is interest rates. The Federal Reserve in May is widely expected to curtail its current rate hike policy.
Without the headwind of rising rates, professionals will steer money back into stocks, with a keen focus on the shares of the fast growers. Tesla shares got a 10% haircut on Thursday, and the stock should be an appealing addition for pros into further weakness. The bottom line is this decline for the benchmark, if it comes, should be shallow. Be ready to buy.
The NDX Loop: I expect to recommend using near-term weakness to re-enter leveraged Nasdaq 100 positions.
Behind the Headlines: The Nasdaq fell 0.8% to 12,059.6 and the Dow closed 0.3% lower at 33,786.6. Consumer discretionary posted the steepest decline among sectors, while consumer staples were the sole gainer.
Breadth favored decliners two-one. There were 170 new lows vs 117 new highs. The leaders were Novartis (NVS), Mcdonald's (MCD), Linde (LIN), Unilever (UL), and GE (GE).
In economic news, existing home sales in the US fell more than projected last month, driven by weakness in the single-family category, according to data released by the National Association of Realtors.
The pace of existing home sales declined 2.4% sequentially to a seasonally adjusted annual rate of 4.44 million units. The consensus on Econoday was for a 4.5 million print. In February, sales had increased for the first time in a year.
Sales are "trying to recover and are highly sensitive" to variations in mortgage rates, NAR Chief Economist Lawrence Yun said. "Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It's a unique housing market."
Weekly claims for jobless benefits in the US rose more than expected last week, suggesting that labor market conditions in the world's largest economy continued to ease.
The seasonally adjusted number of initial unemployment claims advanced by 5,000 to 245,000 in the week ended April 15, the Department of Labor said. The consensus on Econoday was for an increase to 242,000. The previous week's level was revised up by 1,000 to 240,000.
Manufacturing activity in the US Mid-Atlantic region declined further in April even as orders and shipments improved, according to data released by the Federal Reserve Bank of Philadelphia.
