Stocks woke up in a foul mood Tuesday, partly due to better-than-expected economic data that put interest-rate hike worries back on the front burner. A strengthening U.S. dollar didn’t help matters.
The Nasdaq lost 1.1%, while the S&P 500 gave back 1%. Volume on the NYSE and Nasdaq was below average but came in above Friday’s levels, resulting in a distribution day for both indexes.
The Nasdaq ended below its May 14 closing price. May 14 was the day it followed through, confirming a new uptrend. It doesn’t mean the nascent rally is doomed, but it does raise an eyebrow.
Declining stocks swamped advancers on the NYSE by nearly 4 to 1. Losers topped winners on the Nasdaq by 3 to 1.
Meanwhile, the bulls had good news on two fronts: The put/call volume ratio rose to 1.01 from 0.82 Friday. A ratio above 1.0 indicates elevated fear and has been seen near previous market lows.
In addition, leading growth stocks withstood the selling quite well. The IBD 50 fell 1%, in line with the market.
The IBD 50 outperformed last week, up 1% compared to a 0.3% gain for the S&P 500, but that doesn’t mean it’s an easy environment to make money in stocks. New buy opportunities aren’t plentiful. When they do arise, it’s anyone’s guess what happens next.
Other setups to watch include Illumina (NASDAQ:ILMN) and Macom Technology (NASDAQ:MTSI) . Avago (NASDAQ:AVGO) and Actavis (NYSE:ACT) are also close to breakout territory, but both are in late-stage bases.
In a speech Friday, Federal Reserve Chairwoman Janet Yellen said the Fed will enact its first rate hike by the end of the year if the economy improves as she expects. Wall Street eyed more data Tuesday that supported a rate hike before the end of the year.
April new-home sales rose 6.8% to an annual rate of 517,000 in April from an upwardly revised 484,000 in March. That beat expectations of 509,000. Sales have topped 500,000 in four of the first five months of 2015 and are running much stronger than last year.
Orders for durable goods and May consumer confidence data also came in better than expected.
On one hand, strong economic data are positive because they mean the economic recovery is on track. But good numbers also could force the Fed’s hand sooner than expected, and that’s what occasionally throws Wall Street into a tizzy.
The U.S. dollar rose for the sixth time in seven sessions Tuesday. It added another 1% and is up 4.4% since May 15. The market often gets jittery when the dollar is strong because it hurts earnings at firms that sell a lot overseas.
The dollar’s strength hurt energy and other commodity-related groups Tuesday. IBD’s airline group underperformed again, falling 3%. July crude oil sank $1.69, or 2.8%, to $58.03 a barrel.
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