The Big Picture


Indexes Suffer Distribution; More Top Stocks Gap Up

BY PAUL WHITFIELD
INVESTOR'S BUSINESS DAILY
07:23 PM ET


Stocks struggled Friday, sliding in sawtooth fashion to end with significant losses.

The Nasdaq, IBD 50 and S&P 500 suffered dents of 0.5%, 0.4% and 0.3%, respectively.


Volume rose across the board.

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The action was sufficiently negative to slap a distribution day on the Nasdaq and the S&P 500. It was the first such day for either index in three weeks.

Economic news provided the market with plenty to ponder, but the indexes wavered as they tried to draw a firm conclusion.

Two reports didn't stray far from the Street's expectations.

The second take on fourth-quarter GDP came in a sliver higher than expected — 2.2% vs. the 2.1% consensus figure. Also, the University of Michigan's consumer survey for February chalked up 95.4 vs. the consensus view for 94, not much beyond estimates.

Two other reports, though, were surprisingly different from the Street's expectations — one bearishly so and one bullishly so.

The Chicago Purchasing Managers Index for February sank to 45.8, the biggest decline since October 2008 and pointing to contraction in manufacturing for the first time in 22 months.

Market watchers will be watching the Institute for Supply Management report Monday to see if it confirms the Chicago PMI data. The ISM report is national, not regional.

Meanwhile, pending home sales in January popped to their highest level in 18 months, according to the National Association of Realtors. The reading was 8.4% above January 2014, the fifth month of year-over-year gains.

Homebuilding stocks, though, didn't react much to the NAR report. It's possible that the good news was already priced into the stocks. For example, D.R. Horton (NYSE:DHI) and Toll Bros. (NYSE:TOL) are up 8% and 12% so far this year, easily topping the indexes. But the two stocks barely budged Friday.

Despite the marketwide distribution, top-rated stocks continued a recent trend of gap-up moves in strong volume.

On Friday, energy-drink maker Monster Beverage (NASDAQ:MNST) gapped up 13% in 542% faster volume. Discount retailer Ross Stores (NASDAQ:ROST) also gapped up, adding 7% in volume 233% above average.

Wireless networking firm Aruba Networks (NASDAQ:ARUN) gapped up 10% in volume 479% above its usual pace. All three were reacting to strong quarterly results.

For the week, the IBD 50 led with a 1.4% gain. The Nasdaq inched up 0.2%, while the S&P 500 fell 0.3%.



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