Running With No Direction: Dow Watch
NEW YORK (
) -- The
Dow Jones Industrial Average
sold off Tuesday following better-than-expected economic news, and yet the blue-chip index was rising Thursday after two disappointing reports.
The Dow was lately up 14 points to 9295, although the index pared gains after jobless claims data and the latest read on the services sector. Earlier, the Dow was higher by as many as 53 points but pulled back after the Institute for Supply Management said its services index for August came in at a reading of 48.4.
Yes, that reading was slightly ahead of the consensus of 48 and was the highest since September of last year, but any reading below 50 indicates contraction. In addition, it seems as though investors were expecting more out of the services index after the ISM's manufacturing index, released Tuesday, rose to a reading of 52.9, meaning the manufacturing sector was expanding.
Weekly jobless claims data also weighed on U.S. averages. The Labor Department said initial jobless claims slipped to 570,000 last week from a revised 574,000 in the prior week, which is a positive sign, although that figure was higher than the 564,000 consensus. Continuing claims rose to 6.23 million from a revised 6.14 million, also higher than economists expected.
Ian Shepherdson, chief economist with High Frequency Economics, said that with jobless claims at their current level, "there is little chance that the rate of decline of payrolls can be sustained at less than 200K per month, which means the unemployment rate will keep rising."
And still, the Dow was higher after four straight weak sessions, with 17 of its 30 components on the rise.
Alcoa
(AA) - Get Report
and
Bank of America
(BAC) - Get Report
were the best performers, up 3.2% and 2.5%, respectively.
General Electric
(GE) - Get Report
,
Caterpillar
(CAT) - Get Report
and
JPMorgan Chase
(JPM) - Get Report
were also among the advancers on the Dow Thursday.
The market received good economic news Tuesday and it dropped. Today, the market gets bad news and it rises, albeit slightly. Does this mean good news is bad news, and bad news is good news?
"That's a good question, and certainly you're seeing that good news in the last few weeks hasn't had the same lift it had earlier," James Paulsen, chief investment strategist with Wells Capital Management. "In the short term, I don't know whether that's a bad sign or a good sign. Maybe it says that market prices have caught up to the idea that things are getting better."
But Paulsen is also quick to point out that it's natural to see a run and fill, and that nothing will move in a straight line. "I'm not so sure that these selloffs aren't so unhealthy," he added.
There are two other important things for investors to bear in mind: There are not as many participants due to the long holiday weekend thanks to Labor Day, and there likely don't be much conviction ahead of the Friday's jobs report.
"Right before the ISM report, the Dow dropped like a rock," Paulsen notes. "That's the type of thing that can happen when there aren't a lot of players around. And I don't know how much significance there is to it, as we're back to where we were. Either way, you're not going to see this market move too far one away or another, as no one will take a big position ahead of tomorrow's number."
Hopefully, next week, Paulsen adds, we'll see more players return to the market. "I'm hoping we'll finally get out of the summer doldrums and see some more volume," he said. "That'll put some more significance into what is happening and where we're going."
