After The Close
The stock market headed lower earlier this morning, but managed to recover partial ground in the afternoon. Initially, investors may have been worried about corporate profits at home, as well as a slower global economic outlook. Of note, strained relations with China, as well as Britain’s plan to exit the E.U. remain areas of concern. At the close of the session, the Dow Jones Industrial Average was down 86 points; the broader S&P 500 Index was off 14 points; and the technology-heavy NASDAQ, which was quite weak today, was lower by 66 points. Market breadth was negative today, with decliners outpacing advancers on the NYSE. Among the major equity groups, the healthcare and utility issues retreated, while the financial names managed to make some progress.
There were no major economic items released today. The lack of information probably did not help sentiment much. Tomorrow we will get a look at the December Producer Price Index (PPI), as well as a report on business conditions in the greater New York region.
Meanwhile, the fourth-quarter earnings season is just beginning. Today, we heard from Citigroup (C). Shares of the banking giant moved up in response to a respectable report. Meanwhile, in the M&A area, shares of Goldcorp (GG) moved higher on news that the company has agreed to be acquired by Newmont Mining (NEM).
Technically, the stock market has shown some resilience over the past couple of weeks. Looking ahead, much will likely depend on the quality of the numerous corporate profit reports that will soon be making news. Of note, traders, when looking at these issuances, will likely be concentrating on year-ahead guidance more than past results.
– 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
After a brutal final quarter of 2018 for those long equities and a rollercoaster start to the New Year, the bulls responded during the first full trading week of 2019. For the five-day stretch, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index rebounded 2.4%, 3.5%, and 2.5%, respectively. The bargain hunting was broadbased, with the mid- and small-cap sectors also delivering gains during the week.
The investment community was emboldened last week by a few significant events. The week started off on a positive note, with investors still cheering the previous Friday’s strong report on the labor market. Specifically, December nonfarm payrolls came in at more than 300,000 positions, which was more than double the expectation, and the November figure was revised higher. The payroll data offset some concerns about a slowdown in both manufacturing and nonmanufacturing activity last month. All in all, the reports on the U.S. economy have proved modestly supportive for equities during a difficult stretch for Wall Street. Then last week, the market reacted positively to the commencement of new trade talks between the United States and China, with hopes that the meetings may eventually lead to a breakthrough in the trade conflicts between the world’s two-largest economies, and further commentary from Federal Reserve Chairman Jerome Powell. His remarks were again interpreted as being less hawkish than his stance on monetary policy when he was appointed central bank leader by President Trump last year. All of this news gave a boost to the recently embattled bulls.
On Friday, the major equity averages turned in a nondescript performance, never straying too far away from the neutral line before ending the session slightly in the red. On the day, there was not much in the way of major news to move the stock market forcefully in either direction. When the closing bell rang, it was close to an even split of up and down arrows among the 10-major equity groups, and the spread between winning and losing issues was narrow, with slightly more advancers on both the New York Stock Exchange and the NASDAQ. If not for a poor showing from the commodity-driven sectors (i.e., energy and basic materials), it would have been a decisive winning conclusion to a good week for the bulls.
Looking to the week at hand, many of the aforementioned variables will remain in play for market participants, plus the start of fourth-quarter earnings season. The reporting season unofficially kicks off tomorrow with the release of quarterly results from banking giant JPMorgan Chase (JPM – Free JPMorgan Stoc k Report). The Dow-30 component headlines a number of releases from the nation’s largest banks, including Wells Fargo (WFC) and Bank of America (BAC). Citigroup (C) reported its latest quarterly results this morning and its stock is down modestly in pre-market action. Shares of car maker General Motors (GM) and Netflix (NFLX) rose last week after the companies provided Wall Street with positive outlooks for the fourth quarter and the year ahead. The consensus expectation is that earnings for S&P 500 companies jumped about 10% in the fourth quarter. Still, our sense is that the forthcoming earnings season will be a big test for the equity market, as the quarterly reports will bring further discussions about international trade, slowing global growth and other issues that have shaken investor confidence since the end of last summer. Our sense is that guidance about the first-quarter may have a bigger impact on trading than the actual results, and thus it is possible that the volatility in the stock market could pick up again in the coming weeks.
And on point, with less than a half hour to go before the commencement of trading stateside, the equity futures are indicating some selling when the U.S. stock market opens. Perhaps, last week’s gains and apprehension about fourth-quarter earnings season are driving investors to take some profits this morning. So far overseas, the mood has been bearish, with the main indexes in Asia finishing lower overnight and the major European bourses sporting red ink as trading moves into the second half of the session on the Continent. The new week is indeed bringing some volatility to the market, with the extent of this week’s anxiety among traders likely to be driven by what sentiment the initial batch of fourth-quarter earnings news brings. Stay tuned.
- William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
