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Dow Industrial Average

Key Statistics: April 30

Open: 11168.23

High: 11197.93

Low: 10999.69

Close: 11008.61

Change: -158.71 (-1.42%)

RSI: 51.13

MACD: 93.99

Strategy

The US stocks suffered a setback for the second time this week after financials collapsed following the downgrade of Goldman Sachs by two research houses. Now that the Dow has yet again slipped below its 50 day MA, there are chances that a small sell-off may well again set in before consolidation next week. 

Market Commentary

Stocks plunged Friday after reports that Goldman Sachs is facing a criminal probe sparked analyst downgrades and a selloff in the financial sector.

The Dow Jones industrial average shed 159 points, or 1.4%. The S&P 500 index lost 20 points, or 1.7%. The Nasdaq composite lost 51 points or 2%.

S&P and Bank of America-Merrill Lynch downgraded the Goldman Sachs stock on fears of a criminal investigation, which led to major fall of 10% in the stock. The stocks of Bank of America and Morgan Stanley also shed weight in the session in sympathy.

Meanwhile, the first quarter GDP hit an annualized rate of 3.2% on Friday. The headline number was essentially on par with the 3.3% increase that had been widely expected. This was after GDP rose at a 5.6% annualized rate in the fourth quarter of 2009.

But what failed to impress the markets was that personal consumption increased 3.6%, which was stronger than the 3.3% increase that had been widely anticipated. The absence of participation by traders due to rise in fear factor led to a sell-off in the market.

Utilities was the only sector to gain in the session and recorded 0.5%. However, on the other hand, Financials (-2.5%), Tech (-2.2%), Industrials (-2.2%), Consumer Discretionary (-2.0%), Materials (-1.6%), Health Care (-1.2%) and Energy (-1.1%) sectors lost the most in the session.

Out of the 30 Dow constituents, Friday was a rare day in which all the 30 stocks ended with some losses.

In addition to the financial components, other big losers included Boeing, Caterpillar, Hewlett-Packard, IBM, McDonald's and Microsoft turned out to be the laggards.

The Chicago PMI, a regional reading on manufacturing, rose to 63.8 in April from 58.8 in March, against forecasts for a rise to 59.9. Even the April consumer sentiment was revised upwards to 72.2 from 69.5, beating forecasts for a revision to 71.

The $ fell versus the euro and gained versus the yen.

U.S. light crude for June delivery settled up 98 cents to $86.15 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $11.90 to settle at $1,180.70 per ounce.

The Day Ahead

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ISM Manufacturing Index