The major averages closed out a positive week mixed today as NASDAQ rode the FAANG names to a new record high, but the DJIA was weighed down by -9% drops in Intel (INTC) and International Business Machines (IBM) after beating earnings, but offering up disappointing forward business plans. Economic data was better than expected with January Manufacturing PMI at 59.1 vs. 56.5 estimated and Services PMI at 57.5 vs. 54.4 consensus. December Existing Home Sales also topped estimates. The different indexes traded in a narrow range after a warning from Dr. Fauci that new strains of the coronavirus could make vaccines less effective and delay economic progress. Reopening stocks, including airlines, cruise lines and casinos traded lower after the comment. Gains in Alphabet (GOOGL) and Facebook (FB) helped the Communication Services (XLC) outperform, while Financials (XLF), Energy (XLE), Industrials (XLI) and Materials (XLB) were red. The small cap Russell 2000 outperformed and finished higher for the 11th week in 12 after gaining +1.28%. The DJIA lagged the broader market sinking 179.03 points (-0.57%) to 30996.98, while the S&P 500 eased 11.60 points (-0.30%) and closed at 3841.47. The NASDAQ added 12.15 points (+0.09%) and settled at 13543.06.

Breadth was positive with advancing issues beating declining issues by 209 units on the NYSE and 1.5:1 on the NASDAQ. Advancing volume was 55% of the NYSE and 61% of the NASDAQ. VIX rose 0.59 (+2.77%) and finished at 21.91. Crude oil prices lost 1.15 (-2.16%) on a buildup in stockpiles and the February contract closed at $51.98 a barrel. Gold prices fell 10.40 (-0.56%) and finished at $1855.50 an ounce.

The different indexes drifted lower into the close today as investors prepared for a heavy dose of Q4 earnings to start the week. Several big cap tech names are on the slate and we could see big cap tech names lift the market to new highs again next week. In addition, investors will focus on new resolutions coming out of the White House over the weekend that could affect investments. For now, underlying breadth is supportive of higher prices, but momentum is slowing.

Earnings releases to watch for on Monday include: Boot Barn Holdings (BOOT), Kimberly-Clark (KMB), Steel Dynamics (STLD) and TCF Financial (TCF).

Monday’s Market Moving Economic Calendar: Dallas fed Mfg. Survey.

By David L. Blake, CMT