THE S&P 500 failed to break a key technical resistance level for a second day yesterday as low trading volume raised further questions about the market’s strength.
The broader market index closed slightly below 1,333, a closely watched level as it represents double the low reached in March 2009.
Trading volume was relatively low with just 7.03bn shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, compared with last year’s estimated daily average of 8.47bn.
But a rebalancing of the Nasdaq 100, which takes effect on 2 May, spurred traders to buy companies with increased weightings, including Microsoft, Intel and Cisco Systems, all of which rose around 1 per cent.
“The (low) volume is a sign that there is little conviction from sellers in this market,” said Jeff Kleintop, chief market strategist for LPL Financial in Boston.
The S&P has slowly built gains since mid-March in mostly quiet sessions. Last week was the thinnest week of trading so far in 2011 and Monday was the lowest-volume day of the year.
“Those wishing for more volume should be careful what they wish for since a rebound in trading volume may come with the return of volatility, rather than the steady gains we have seen since last summer.”
Minutes of the last Federal Reserve meeting showed some Fed officials believed the US central bank should tighten conditions before year-end. Stock market reaction was muted.
Chip stocks were supported after Texas Instruments late Monday offered to buy National Semiconductor in a deal worth $6.5bn, a premium of 78 per cent. The PHLX semiconductor index rose 2.3 per cent.
The Dow Jones industrial average slipped 6.13 points, or 0.05 per cent, to end at 12,393.90. The Standard & Poor’s 500 Index inched down just 0.24 of a point, or 0.02 per cent, to 1,332.63. The Nasdaq Composite Index rose 2.00 points, or 0.07 per cent, to 2,791.19.
Apple’s weighting was slashed, though it remains the biggest component of the Nasdaq 100. The stock was down 0.7 per cent at $338.89 after earlier falling as much as 1.5 per cent.
The announcement of a merger with Texas Instruments drove National Semi shares up 71 per cent to $24.06. Texas Instruments added 1.7 per cent to $34.69. The deal is the latest in a string of multibillion-dollar deals that have helped pushed stocks higher in recent weeks.