After the Close
As a wide array of companies released their quarterly earnings reports, and following a solid advance to start the day, most U.S. equities finished the day largely in negative territory. While the Dow Jones Industrial Average managed to remain above the breakeven line through most of the afternoon, the broad-based S&P 500 and tech-laden NASDAQ fell into the red around 1:00 PM EST and struggled to regain their momentum. The blue-chip index benefitted from a solid quarterly performance by telecom giant Verizon (VZ - Free Verizon Stock Report), investors likely collected profits on elevated valuations across the board. The overall economic reading from Corporate America remains bright, with a healthy majority of companies reporting in-line or better-than-expected profits for the second quarter.
Meanwhile, domestic crude oil reached another eight-week high today, the fourth consecutive positive session for the embattled commodity. Domestic stockpiles continue to decline, a development that, in tandem with Saudi Arabia’s intention to cut exports in the coming months, has returned some cautious optimism to the market. That U.S. producers are beginning to cut production due to weak oil prices is another factor helping to raise sentiment.
But, despite today’s modest pullback, the overall feeling amongst market-watchers is bullish. Yesterday’s dovish comments from the Federal Reserve has all but assured the current monetary environment will persist through year end, or at least until the December meeting. Market breadth favored declining issues today, while the market sectors were mostly mixed. Technology and healthcare stocks shed the most aggregate value, which worked to offset notable strength in the aforementioned telecom category.
Looking to tomorrow, while earnings will continue to be a major determinant in how the final day of weekly trading goes, much of the focus will turn to the broader economy, as a key GDP issuance will be made tomorrow morning. While the Dow looks very likely to post a week-long gain, the other major indexes’ directions remain up for grabs. Stay tuned. – Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Mid-Day Update - 12:30 EDT
Equities are pressing ahead again today. At just past noon in New York, the Dow Jones Industrial Average is up 65 points; the S&P 500 Index is ahead five points; and the NASDAQ is higher by 31 points. Market breadth is favorable, with winners slightly ahead of losers on the NYSE. From a sector perspective, the consumer, telecom, and technology names are displaying leadership. In contrast, the healthcare sector is lagging the broader market.
Meanwhile, traders received a couple of economic news items this morning. Specifically, durable goods orders rose 6.5% during the month of June, exceeding analyst expectations. However, the core figure, which excludes transportation, was less impressive. On the employment front, initial jobless claims edged up to 244,000 for the week of July 22nd, which was more or less in line with the consensus forecast. Tomorrow, the main news item will be the advance estimate for second-quarter GDP.
Elsewhere, the second-quarter earnings season continues to dominate the headlines. Over the past 24 hours, we have heard from a number of large names. Specifically, shares of Facebook (FB) are trading nicely higher after the social media giant delivered a solid profit report. In addition, shares of Procter & Gamble (PG - Free Procter & Gamble Stock Report) are edging up slightly, in response to a respectable release. However, some on Wall Street have concerns about the company’s business outlook. After the market closes today, we will hear from Amazon.com (AMZN), Intel (INTC - Free Intel Stock Report), and Starbucks (SBUX). Given the size of these companies, Wall Street will likely be paying close attention.
Technically, the equity markets continue to forge ahead. The bulls seem to be pleased with the way the second-quarter earnings season has been shaping up, so far. Further, the global economic outlook has been getting a bit brighter, and that may be playing a role in the stock market’s ongoing rise, as well. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
Following a strong stock market advance on Tuesday, as Wall Street gave a generally reassuring verdict to earnings season thus far and a thumbs up to an expected dovish Federal Reserve monetary statement after the conclusion of its FOMC meeting yesterday afternoon, stocks began the latest session with further strength. However, the initial upturn was more selective than the day before. The Street was led this time by a near 110-point early advance in the Dow Jones Industrial Average. This time, unlike Tuesday, the NASDAQ chimed in. All told, the Dow's initial charge produced yet one more all-time high for that 30-stock composite.
As to the Dow, it was pushed strongly higher by a clear earnings beat and consequent 8% early jump in shares of Dow component Boeing (BA - Free Boeing Stock Report). The S&P 500 Index also hit an early record high. However, the smaller-cap indexes did not participate, with the S&P Mid-Cap 400 and the small-cap Russell 2000 giving ground. Underscoring the divided character of the market yesterday morning was the fact that gaining and losing stocks were about in balance on the Big Board, with just a small nod going to the former. On Tuesday, advancing issues had held an appreciable lead.
Also helping to keep any major selling at bay as Wall Street awaited the mid-afternoon Fed interest-rate decision was the report of a slight uptick in new home sales in June. On point, one week after reports of strong advances in housing starts and building permits in June were issued and two days after the National Association of Realtors posted a positive surprise on the existing home sales front for that month,the Commerce Department yesterday morning posted data showing that U.S. sales of new homes perked up slightly last month, edging up 0.8%, to 610,000 annualized units. Only housing shortages prevented a stronger tally.
So, with housing strong enough to mollify the bulls, but not so strong that such activity would induce the Fed to strike boldly on the rate front, stocks continued to move higher, particularly the Dow Industrials, which moved further into record territory, posting a morning-best gain of some 130 points. However, that strong upward move did not fully last into the noon hour, and while the Dow held a solid 100-point advance through the first half of trading, thanks largely to the Boeing gain, some of the other indexes wilted a little as the afternoon approached, although the other large-cap composites remained in the green, if modestly so.
The market then essentially treaded water as the FOMC meeting's conclusion neared, although there was some small erosion in the Dow's gain as we neared the 2PM Fed decision and accompanying statement as to its future intentions. Overall, though, the market acquitted itself rather well as the Fed announcement neared, in spite of some logical nervousness at that point. As to the central bank, it did not blink and, as expected, voted to keep interest rates unchanged. It will then revisit the situation six weeks from now. Our sense remains that just one additional interest rate increase, at most, will be voted in later this year.
The stock market then held on with the aforementioned solid Dow gains intact into the close. But it was no better than a mixed session in the end, as Boeing's near 10% rise was all that kept the Dow positive, while the small-cap Russell 2000 fell back on the day and the S&P Mid-Cap 400 really took a pummeling. Breaking the day down further, we saw gaining and losing stocks wind up about even on the NYSE. As to the 10 leading sectors, telecom led the way, in a rare show of strength, boosted by a 5% increase in the shares of erstwhile Dow-30 component AT&T (T) on a profit beat.
Looking out at a new day now, we look to Asia for some early hint of things to come and see that stocks were higher in overnight trading, as investors focus on the Fed, while in Europe at this time, the leading bourses are trending higher, save for Germany's DAX. At the same time, oil is holding at an eight-week high; metals prices are higher again; and Treasury yields, off yesterday, are back up in early dealings today. Finally, U.S. equity futures are tracking higher at this hour, presaging a stronger start to the week's penultimate session. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
