After the Close
Equities put in a volatile and weaker session today. Specifically, the market declined considerably at the outset, but managed to pare its losses throughout the afternoon. At the close of trading, the Dow Jones Industrial Average was down 63 points; the broader S&P 500 Index was off five points; and the NASDAQ was lower by 16 points. Market breadth was negative with declining issues easily ahead of advancers on the NYSE. Weakness was concentrated in the technology and financial issues, while some relative strength was found in the healthcare and defensive utility names.
Traders received a few economic news items today. Of note, export prices rose 0.4%, while import prices eased 0.2%, in the month of December. These readings were in line with the consensus view, and seen as generally favorable. Elsewhere, initial jobless claims came in at 247,000 for the week of January 7th, which was a slightly better reading than had been anticipated. Tomorrow quite a few reports are due out. Specifically, we will get a look at the latest monthly producer prices, retail sales, and consumer sentiment numbers from the University of Michigan.
On the corporate front, a few widely held corporations delivered their results over the past 24 hours. In the technology sector, shares of Taiwan Semiconductor (TSM) moved lower, after that company produced decent results, but issued a disappointing outlook. Meanwhile, shares of KB Home (KBH) closed up slightly, after the home builder put out a mixed release. The pace will soon quicken, as the fourth-quarter earnings season commences in the days ahead.
Technically, the market has had difficulty moving higher over the past few weeks. Perhaps, traders are waiting for corporations to weigh in with their numbers and provide fresh guidance for 2017. Further, some on Wall Street may be uncertain regarding the political changes soon to be taking place in Washington. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:05PM
Stocks opened sharply lower and widened their losses soon thereafter, as the political news cycle continues to sow uncertainty as it pertains to the nation’s economic policies. A bearish dominance in mid- and small-cap trading kept averages low throughout the morning hours. The S&P 500 lost as much as 17 points today, while the NASDAQ temporarily traded below 5,500. The Dow 30, which closed Wednesday within striking distance of its own psychologically significant target (20,000), had an especially trying morning. The index shed more-than 180 points at its mid-morning nadir and set a new one-month trading low in the process.
The spate of selling appears to be a reaction to President-elect Trump’s press conference yesterday. Investors were disappointed, ostensibly, by the lack of clarity offered on several promised policy changes. Meantime, his criticism of the pricing practices in the pharmaceutical industry sent healthcare stocks significantly lower. Defense contractors also took a hit when Mr. Trump announced his intention to implement a more competitive bidding environment on many lucrative government contracts. Still, the incoming leader neglected to offer substantial updates on his plans to lower corporate taxes, deregulate industry, and stimulate infrastructure spending.
Meanwhile, statements from several Federal Reserve members caused some worry in the financial sector. Philadelphia Fed President Patrick Harker reiterated the plan for three interest rate hikes in 2017, but added that growth policies ultimately come from the desks of elected officials. Chicago head Charles Evans was more cautious, claiming accelerated economic advances were possible, but unsustainable, when solely dependent on monetary policy. Banking stocks have accordingly had a rough go of it on Thursday. Representatives from the St. Louis and Dallas branches are scheduled to speak in the afternoon, while central bank Chair Janet Yellen will hold a town hall-style meeting at 7 P.M. from Washington D.C.
So, as we passed the noon hour in New York City, declining issues held a sizable 2.5-to-1 lead over gaining stocks, with each of the 10 major market sector holding losses. Technology, financials, and industrials have experienced the most pronounced drops so far today. The bulls have their work cut out if the Dow is to make another run at 20,000 before next Friday’s inauguration. Thereafter, we expect similar doses of reality to occur in the event specific timing and details of government policies are not made available to investors. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
A somewhat fatigued stock market made yet one more attempt to approach 20,000 on the Dow Jones Industrial Average yesterday morning and, as before, the effort proved unsuccessful. On point, after a solid early rise that lifted this 30-stock composite to within 25 points of that psychologically key level during the mid-morning hours, the buyers ran out of steam, as has happened on a number of occasions, and stocks began to backtrack. Negative comments on the pharmaceutical industry (see below) also emboldened sellers, for a time.
Overall, though, the early tone was generally positive, with the Dow climbing to a mid-morning gain of some 115 points, while the NASDAQ, which has outperformed the blue chip index in recent sessions, lagged on weakness in technology. Then, stocks weakened as President-elect Donald Trump delivered his first news conference at 11:00 AM (EST). The turnaround from mostly green arrows occurred as Mr. Trump took a shot at the drug industry--in particular its pricing practices. Most drug stocks slumped on his comments.
It also seemed as though traders were uncertain about the President-elect's indicated policies and the chances that they will be adopted in Congress. Essentially, such proposals are highlighted by promises to lower corporate taxes, deregulate certain sectors, and inject fiscal stimulus. Questions also linger on trade and immigration. Meantime, the market is also braced for the pending start of earnings season, led by a pair of high-profile announcements from the banking sector, in particular JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report) and Bank of America (BAC).
As to the market, after this brief meltdown, which saw the Dow go from the aforementioned 115-point gain to a modest loss on concerns about the drug industry, stocks turned on a dime once more, with the Dow rising to an early afternoon gain of about 80 points, while the S&P 500 Index and the S&P Mid-Cap 400 went positive, as well. However, the small-cap Russell 2000 and the NASDAQ continued to struggle, albeit just less so. Indeed, for a time, it looked as though we could have yet one more attempt to ascend Dow 20,000.
But the sellers soon entered the fray again, and a volatile stock market took another step backwards, with the Dow's 80-point rise quickly being halved. From there, things stabilized, with modest gains being sustained by the Dow, but a loss of some magnitude persisting on the NASDAQ. Breaking the market down in the mid-afternoon, seven of the 10 groups were higher at that point, with modest gains the rule, save for a 1.5% drop in health care. Also the divided market showed a three-to-two advantage for gainers on the NYSE, while losing issues were holding sway on the NASDAQ.
This divided pattern then continued to an extent, with the Dow generally firming up somewhat further as the day wound down and even the NASDAQ breaking back into the plus column, but gingerly. Helping the market during the day was a slight dip in the dollar and a further easing in note and bond yields. In the meantime, the drug group, albeit lower, did have one standout on the Dow, that being Merck (MRK), which gained on good new product news.
The market then settled in with solid gains as the final bell sounded. And although the Dow remained below its morning high by some 20 points, the final tally was strong enough to make another run at 20,000 this week a reasonable possibility. Elsewhere, the NASDAQ, on some late buying, ended the session 12 points higher, while the S&P 500 Index was better by a half dozen points. Also, advancing NYSE stocks won the test of wills by some two to one, while on the NASDAQ the positive margin was modest, reflecting that composite's underperformance.
Now, looking out at a new day we see that stocks were lower in Asia overnight, while the principal bourse are tracking downward, as well, in Europe so far this morning. As to other indicators, oil prices, after a nice run yesterday, are again higher so far today, while interest rates are down and gold is up. Finally, our futures are suggesting a weaker opening when trading resumes later this morning ahead of a succession of Federal Reserve speakers. Still, another run at Dow 20,000 could well be at hand today or tomorrow if things break right. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
