Stocks Still Can’t Find Footing

Any confirmation needed that a 6% rally in stocks that began a month ago was
getting a little tired was found Monday, with equities retreating to their
lowest close in nearly two weeks. The Dow Jones Industrial Average wound up
gaining a point to finish at 12,381, but the Nasdaq slipped 9 points to 2772 and
the S&P 500 fell 4 points to 1324. As mentioned recently in this space, it was
becoming increasingly clear in the past few trading sessions that the main
drivers of a momentum-based rally small-caps, energy, and large-cap tech were
looking doubtful in their ability to provide any more energy for stocks upside.
And here we went again, with the Russell 2000 falling 0.8% on Monday and
putting up a decline of about 2.5% since Wednesdays close. Similarly, the Nasdaq
100 Index has found itself in a downtrend since the month started, and is in
fact down about 3.5% since hitting its 2011 closing high on Feb. 17. Oil prices
also gave back on Monday, settling under $110 a barrel for the first time since
last Thursday, and sapping the will of traders sifting through small- and
mid-cap energy stocks for one more momentum play. Of course, this meant good
news for airline stocks, which were among the top industry performers of the
day, reversing a 2011 downtrend for at least one day. Shares of Delta Air Lines
(NYSE: DAL ) rose 4.5%, while United Continental (NYSE: UAL ) gained 3.7%.
Perhaps another bright spot for stock optimists was the relative outperformance
by financial stocks, which hadnt joined wholeheartedly in the markets recent
advance. The SPDR Financial Select Sector (NYSE: XLF ) exchange-traded fund
finished precisely flat at $16.46, suggesting that at least in terms of
momentum-based sentiment, there is a bottom potentially in play. Much of that
could be altered by the next several weeks of first-quarter earnings reports,
which should put a little more substance behind what has been a fairly
low-volume rally and drift in stocks. The unofficial first entrant, Alcoa
(NASDAQ: AA ), didnt do much for bulls late Monday, offering a mixed bag
quarterly earnings report that saw the aluminum giant beat profit expectations
but fall short on the top line. More troubling for investors may be in potential
echoes to come from the earnings report late Monday from gaming equipment maker
WMS Industries (NYSE: WMS ), which lowered near-term quarterly forecasts and
said it didnt see much improvement to its industry outlook  for this year and
2012. Its that sort of statement that market bulls hope is few and far between
over the next few weeks.