Bulls refuse to give up, leaving stocks near the flat line after mostly a negative session. The Dow (DJI) closed the session with a gain of 17.46 points to 10,642.15. The S&P 500 (SPX) was flat at 1,150.51 with the Nasdaq (COMP) down 5.45 points to 2,362.21. Volume was light once again at 926.1 million shares on the NYSE and 1.91 billion shares on the Naz. Market breadth was negative by a 13-to-17 and 11-to-16 margin on the Big Board and Naz respectively.

The SPX continues to find resistance at 1,500, which has rejected a higher move for the past week. Nonetheless, early weakness in stocks was erased late in the session, allowing the Dow to finish in the black. Wal-Mart (WMT) was a major reason for strength in the Dow Monday. The retailing giant tacked on 2.82 percent to $55.42 after Citigroup raised its rating on the stock to “Buy” from “Hold” and put a $65 price target on the stock.

Traders were worried about comments from Moody’s this morning after the firm warned about debt ratings for the U.S., U.K, France and Germany. This led a move to the dollar as a safe-haven. Commodities like oil and gold moved lower on the news with oil producers underperforming the broader market. The Oil Services HOLDRs (OIH) fell 1.12 percent Monday to close at $125.69.

Google (GOOG) hurt the tech sector with the stock down 2.88 percent to $562.86. Reports in the Financial Times stated that it seems highly likely that Google will shut down its Chinese search engine due to censorship issues with the Chinese government. Chip stocks also underperformed with KLA-Tencor (KLAC) down 4.63 percent after Oppenheimer cut its rating on the stock, along with several other chip makers. The Semiconductor HOLDRs (SMH) fell 0.67 percent to $26.83 on the session.

In economic news, industrial production rose 0.1 percent, but would have fallen without a spike in utilities output from bad weather. Nonetheless, this is the eighth consecutive month of gains in industrial production. The Empire State Mfg. Survey showed a mild decline in March to a level o 22.9 from 24.9 in February. However, this was better than expected and many components saw strength including new orders at 25.4 and employment at 12.4.

Tuesday will see the release of housing starts, as well as the FOMC statement. Starts are expected to fall and could even be worse than expected given the drop of two points in the housing market index for March. The FOMC is not expected to change the Fed funds target rate, but could hike the discount rate another 25-basis points. Traders will be listening for clues to when rates will be hiked and will be looking to see if the statement changes.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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