Wednesday’s Lackluster Performance Leads to Early US Stock Market Weakness

The major U.S. cash and futures markets may have closed higher on Wednesday, but the price action was unimpressive with the indexes struggling most of the session to stay on the positive side after their initial thrusts higher. Lackluster is the best way to describe the trade especially with the groundwork for a major rally laid out early by positive coronavirus vaccine news and a blowout quarterly report from Goldman Sachs.

On Wednesday, the benchmark S&P 500 Index settled at 3226.56, up 29.04 or +0.97%. The blue chip Dow Jones Industrial Average finished at 26870.10, up 227.51 or +0.91% and the technology-based NASDAQ Composite closed at 10550.49, up 61.91 or +0.65%. All three markets gave up more than half of their earlier gains and at times were flirting with negative territory.

Does the price action indicate an imminent change in trend? It’s too early to tell although the NASDAQ’s technical closing price reversal top on July 13 is something to be worried about. Remember, the mostly technology driven index took the indexes higher, and it could take them straight down too.

The price action also indicates a “tired” trade, whereby investors seem to be getting a little aggravated chasing the market during the U.S. session after Asian and European investors drove prices higher by catching the bullish news earlier in the session. This type of trade suggests an overpriced market, which mean investors are switching from buying strength to looking for value. This is something we haven’t seen in a while.

Further evidence of a possible shift in investor strategy is the fact that the S&P 500 Index beat the technology-heavy NASDAQ Composite for a fourth straight session, a feat scored only twice since Wall Street launched its massive recovery last March.

Stock Market Winners and Losers

Gains for the NASDAQ were capped by online retail giant Amazon.com Inc, video streaming platform Netflix Inc and Microsoft Corp, which slipped after surging to record highs recently. Amazon slid 2.4%. Netflix fell 0.3%, Alphabet (Google’s Parent) and Microsoft also closed lower.

Apple, however, contributed to the gains Wednesday, rising 0.7% after a European Union court annulled a 2016 European Commission order for the tech giant to pay $15 billion in taxes.

Goldman Lifts Banks after Early Mixed Results from Major Banks

Goldman Sachs reported quarterly numbers that easily beat analyst expectations. The company’s results were driven by a 93% surge in trading revenue. Goldman shares gained 1.4%.

On Tuesday, JPMorgan Chase reported better-than-expected quarterly numbers, but Wells Fargo suffered a $2.4 billion loss and slashed its dividend to 10 cents per share.

Morgan Stanley and Bank of America gained ahead of their results on Thursday.

For a look at all of today’s economic events, check out our economic calendar.