Stocks Stay Positive After Late Day SELL OFF

The major American stock indices spent most of Monday well above Friday’s closing levels. At 10:38 EDT, the Dow was up by 87 points. Again, just before 1:30 the Dow appeared ready to hit a new high for the day. Encouraging news about a bond-buying plan by the European Central Bank combined with better-than-expected earnings reports from a number of companies to give investors a good day.

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Nevertheless, at 3:35 the sell-off began, with the S&P and the Dow unwinding more quickly than the Nasdaq. By the closing bell, the Dow was back down to 13,117 with only 21 points (0.16%) above Friday’s closing level. Sixty points disappeared in the last half-hour of the session. The S&P 500 fared a tad better with a 0.23 percent gain for the day, closing at 1,394 (NYSE:SPY). The Nasdaq held a strong gain of 0.74 percent to finish at 2,989 (NASDAQ:QQQ) and the Russell 2000 achieved an identical result, finishing the day at 794, with a gain of 0.74 percent (NYSE:IWM).

In Europe, stocks had a good day after Germany sent some signals that it was not averse to a bond-buying program by the ECB. The Euro STOXX 50 Index finished Monday’s session with a 1.13 percent gain. The FTSE 100 Index had to settle for a more modest 0.37% advance.

European ETFs did well on Monday. The iShares Germany Index (NYSE:EWG) picked up 0.82 percent. The iShares Spain Index (NYSE:EWP) gained a whopping 4.05 percent and the iShares Italy Index (NYSE:EWI) picked up 2.02 percent on the hopes that they would both benefit from the ECB bond-buying effort.

As of 5:26 EDT, the euro declined 0.03% against the dollar, trading at $1.2397 (NYSE:FXE).

Spain’s ten-year bond yield dropped as low as 6.72 percent on Monday from Friday’s closing level of 6.87 percent. Spain’s two-year bond yield made a steeper decline on Monday, falling to 3.36 percent from Friday’s closing level of 3.89 percent (NYSE:EWP).

Italy’s ten-year bond yield fell to a low of 6.01 percent on Monday from Friday’s closing level of 6.01 percent (NYSE:EWI).

On London’s ICE Futures Europe Exchange, September futures for Brent Crude Oil advanced by 71 cents (0.66%) to $108.16/bbl. (NYSE:USO).

August gold futures advanced by $4.10 (0.26) to $1,610.10 per ounce (NYSE:GLD).

On Tuesday, the Bureau of Labor Statistics will release the Job Openings and Labor Turnover Survey and the Federal Reserve will provide us with the Consumer Credit report for June.

Bottom line: Despite strong advances on Monday, the major American stock indices experienced a significant sell-off during the last half-hour of the session, as thin trading volume undermined investor confidence.

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John Nyaradi is the author of The ETF Investing Premium Newsletter.