Stocks Slide Sideways Again

After a rally of nearly three weeks that saw stocks rise about 6% to return near their highs for the year, a second straight day of sideways trading suggests the market may be getting low on momentum. On Monday, two of the three major indices finished on the red side of flat as the stars of the financial market were gold and silver, which notched all-time and 31-year-highs, respectively. The Dow Jones Industrial Average dropped 6 points to 12,394, the Nasdaq gained 2 points to 2791 and the S&P 500 lost less than a half-point to 1333. An overnight interest-rate hike by China set an early negative tone to things, which was then carried out in a flattish day in Europe – the worry being that a forced slowdown to the Chinese economy wouldn't necessarily be a good thing for the rest of us. The price of crude oil slipped back as a result, to $108.34 a barrel, taking with it transportation stocks, which now have last Friday as a near-term peak to emulate. The breakdown in airline stocks is particularly illuminating, as the sector's selloff –which is again nearing lows of the year – couldn't even be saved by the pullback in crude.  United Continental (NYSE: UAL ) closed down 4.4%, while US Airways (NYSE: LCC ) lost 3.3%. Of course, what we're really talking about in the daily stock market post-mortem game is that most large-cap stocks, or rather, investors in large-cap stocks, have had their fill of the recent rally, or see no need to bid them higher for the moment. Small-cap stocks, however, continue to rise unabated. Note that since last Tuesday's close, the Russell 2000 has risen nearly 2.8%, while the S&P 500 has gained about 1%. While it's a fool's errand to introduce hardcore analysis after two sideways days that followed a 6% runup, one could also venture that while speculators are still chasing smaller names, the underperformance by larger names suggests that some external confirmation, either from first-quarter earnings season or more positive economic data, is needed for stocks to break above the resistance established in mid-February.
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