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Small-Caps Lead the Market Higher in a 'Reversal of Fortune'

The VIX retreats to a new annual low before closing higher

by 5/22/2014 4:18:13 PM
Stocks quoted in this article:

"In a reversal of fortune, small-caps showed leadership today after lagging throughout most of 2014," summarized Schaeffer's Senior Equity Analyst Joe Bell, CMT. "There were plenty of economic reports released today, but none seemed to shake the market too much. The jobless claims news wasn't very impressive, and the housing data showed a slight increase in existing home sales, after three straight months of declines." Against this backdrop, the Dow Jones Industrial Average (DJI) opened south of breakeven -- and traded in a tight range throughout the session -- but ultimately closed with modest gains.

Continue reading for more on today's market, including:

Trading Topic of the Week -- How to Get Started with Options: Check your motives. Never buy an option just because it's "cheap" -- because the higher risk of a 100% loss isn't always such a great bargain.

The Dow Jones Industrial Average (DJI - 16,543.08) traded in a 76-point range today -- and visited both sides of the flat line -- before ultimately closing up 10 points, or less than 0.1%. Nike Inc (NYSE:NKE) and The Home Depot, Inc. (NYSE:HD) both gained 0.9% to pace the blue-chip index's 18 advancers, while The Coca-Cola Company (NYSE:KO) brought up the rear with a 0.7% drop.

The S&P 500 Index (SPX - 1,892.49) gained 4.5 points, or 0.2%, as it advanced upon the 1,900 level once again. Meanwhile, the Nasdaq Composite (COMP - 4,154.34) outperformed its peers with a 22.8-point, or 0.6%, gain.

The CBOE Volatility Index (VIX - 12.03) fell to an annual low of 11.68 around midday, but surged into the closing bell, ending in positive territory. The market's "fear gauge" closed up 0.1 point, or 1%, placing it back above the 12 mark.



A Trader's Take:

"The Russell 2000 Index (RUT) continues to maintain support at its former 2014 low hit in February," noted Bell. "We've experienced quite a bit of volatility this week, but the markets have still struggled to make a meaningful move in either direction."

5 Items on Our Radar Today:

  1. Markit's preliminary purchasing managers index (PMI) rose to 56.2 this month from 55.4 in April, topping economists' expectations. Readings north of 50 point to expansion in the manufacturing sector. Across the globe, the HSBC flash China manufacturing PMI hit a five-month high of 49.7 in May, up from April's final reading of 48.1 to topple economists' consensus expectations. Just south of the 50 mark, however, the reading was still indicative of contraction in the sector. (Reuters; The New York Times)
  2. Elsewhere, weekly jobless claims rose by a wider-than-expected 28,000 to 326,000 during the week ended May 17, the Labor Department noted. The previous week's reading represented a seven-year low. (FOX Business)
  3. Existing home sales rose 1.3% from March to April, to a seasonally adjusted rate of 4.65 million, marking the first increase in 2014. In other encouraging news for the sector, the supply of homes on the market increased 17%, while price increases slowed from the first quarter. (USA Today)
  4. 3D Systems Corporation (NYSE:DDD) saw a surge in call buying, following a news-related pop in the shares.
  5. Option volume surged in the Sprint Corporation (NYSE:S) options pits, with traders playing both sides of the field.

For a look at today's options movers and commodities activity, head to page 2.

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