After the Close
Equities moved lower today, but some buying late in the afternoon helped minimize the damage. At the close of trading, the Dow Jones Industrial Average was off 73 points; the broader S&P 500 Index was down eight points; and the technology heavy NASDAQ was lower by nearly 16 points. The weakness was fairly broad based, with decliners easily outnumbering advancers on the NYSE. Most of the major market sectors ended in negative territory, with pronounced losses in the healthcare and utility names. However, the telecommunications and industrial stocks managed to display some relative strength.
Traders largely ignored a positive batch of economic news today. Specifically, initial jobless claims dipped to 234,000 for the week of January 14th, coming in better than had been expected. Furthermore, housing starts rose to 1.2 million units, annualized, for the month of December, which was a strong reading. In addition, according to the Philadelphia Fed, business conditions in the Pennsylvania region improved quite a bit in January. No economic reports are slated for tomorrow, but many traders will probably be watching the Presidential inauguration taking place in Washington, D.C.
Meantime, the fourth-quarter corporate earnings season is starting to heat up. A number of widely held companies posted their results lately. Specifically, shares of Netflix (NFLX) moved up, as investors were pleased with the media provider’s report. Further, shares of Union Pacific (UNP) advanced in response to an encouraging release. Meanwhile, after the session today we hear from American Express (AXP - Free American Express Stock Report) and International Business Machines (IBM – Free IBM Stock Report).
Technically, stocks have been somewhat lackluster lately. But, there are a number of catalysts in the corporate and political arena that might influence the market. – 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 - 12:00 PM EST
The U.S. equity market started today’s session much like it did yesterday, which was in directionless fashion. Perhaps it was a combination of no major pre-market news on either the earnings front or the economy—the Federal Reserve’s latest Beige Book summation of economic conditions (released yesterday afternoon) did not show any material change in the performance of the U.S. economy—and some possible hesitation on the part of investors to make any major moves ahead of tomorrow’s inauguration address by the 45th President of the United States Donald Trump (more below). However, about an hour into the session, the bears made a move, with even the NASDAQ, which started to the upside, succumbing to a spate of selling. Investors should note that the performance of the broader small-cap sector, as reflected by the Russell 2000, is the weakest among the major averages, which may be an indication that it could be a down day for Wall Street when all is said and done.
Meantime, we think investors are waiting to see what tone the incoming President will strike tomorrow with regard to a number of issues, including healthcare, energy, trade, and financial regulations. This may have an effect on many of the 10 major equity groups. Investors should recall that at his first press conference last week since winning the election, Mr. Trump’s commentary produced swift and pronounced swings in the major U.S. equity averages. Thus, his inauguration speech tomorrow, shortly after taking the oath of office at 12:00 P.M. (EST), which will be viewed by a much bigger audience worldwide, may well have a similar impact on the major averages. Our expectation is that we may see a spike in volatility during the midpoint of tomorrow’s trading session.
Turning back to today’s dealings, market breadth, which was evenly split on Wall Street to start the session, has clearly moved in favor of the bears. The spread between winning and losing issues widened on both the New York Stock Exchange and the NASDAQ; there are now more down than up arrows among the 10 major equity groups; and the major indexes, as noted above, have weakened some. As we approach the noon hour the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index are all in the red.
From a sector perspective, the majority of the major equity groups are now in negative territory, led lower by the healthcare, utilities, and, to a lesser extent, the energy, basic materials, and financial stocks. Looking forward, it may be a rocky road for healthcare group, as the investment community tries to decipher what the likely forthcoming repeal of the Affordable Care Act will have on the sector. Meanwhile, we are seeing some selective buying in the industrial and technology categories.
Looking ahead to the second half of the session, we would not be overly surprised if the bulls did make some kind of response to the recent move by the bears. However, our overall sense, given the nearly 1% decline in the small-cap area, is that the bulls will have a hard time completely reversing the bearish mood right now on Wall Street, especially with the investment community a bit on edge ahead of tomorrow’s speech by Donald J. Trump after he is sworn in as the nation’s 45th President. 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.
Before the Bell
Following a weak performance on Tuesday, to start this holiday shortened four-day trading span, Wall Street began the session yesterday on a mixed note, and continued along that uneven road for much of the morning. On point, the small- and mid-cap indexes, the NASDAQ, and the majority of stocks rose early on (if grudgingly), while the Dow Jones Industrial Average, which continues to be rebuffed in its attempt to surpass the 20,000 mark, faltered once again, albeit modestly so. As to a breakdown, we saw an early decoupling of basic materials and energy, with the former rising and the latter falling on lower crude prices.
Regarding early influences in trading, the market continued to take a sideways approach, as equity traders awaited policy changes in Washington beginning this Friday. As to data, the Consumer Price Index rose by 0.3% in December, according to figures issued before trading commenced yesterday morning. That put the gain at 2.1% for the year. The monthly CPI increase was in line with expectations. Then, 45 minutes later, the Commerce Department reported that industrial production had increased by 0.8% in December, a hefty rise that underscored the economic recovery's seeming staying power.
Even with those relatively decent numbers, the stock market could not break out of its tight range during the morning, and as we headed toward the noon hour in New York, the Dow was still down; the S&P 500 Index and the NASDAQ were still slightly higher, as was the small-cap Russell 2000. As for individual issues, the big box retailers were still faltering, with the shares of several of these chains among the day's largest casualties. Then, stocks weakened somewhat further to start the afternoon, with the NASDAQ giving up almost all of its gains, while the Dow slid more deeply into the red.
Then, as we reached 2:00 PM (EST), the Federal Reserve issued its Beige Book economic summation, a compilation used by the central bank to help it formulate monetary policy. That report suggested that the vast majority of the 12 Fed Districts across the country were seeing modest to moderate gains in business activity; one District was seeing just slight improvement; and the 12th was noting steady activity. Such a report, which also evidenced tightening labor markets, increases in pricing, and improvements in manufacturing suggests that the Fed will continue to raise interest rates--perhaps as early as late this month.
Meanwhile, the stock market limped into the late afternoon, with the Dow still somewhat under water, but the other indexes struggling to stay above the breakeven line with some success. It seems that Wall Street is waiting for the inauguration and the accompanying early policy initiatives of the incoming President--especially his plans for infrastructure spending, the replacement of the Affordable Care Act, and tax policies. The market is hoping for clarity on these and other issues before venturing materially higher in our view. There also is some concerns about protectionist policies.
The market then sought to improve just a little as the final bell approached, and did so with some success, as the Dow's loss, once over 80 points, dwindled to just 22 points, while the S&P 500 Index moved modestly into the black, and the NASDAQ edged further into the profit column, finally closing ahead by 17 points. Constructive commentary by Fed Chair Janet Yellen during the final hour of trading clearly helped the market end the day on a constructive and irregularly higher note. In sum, half the top 10 equity groups were high, while gaining stocks just narrowly outdistanced declining issues on the Big Board and the NASDAQ.
Looking ahead to the penultimate trading session of this holiday shortened week, and casting our eyes overseas, we see that stocks were mixed overnight in Asia, but are lower in Europe so far this morning. Also lower is gold, falling by about $10 an ounce. Treasury bonds, too, are weaker, with the yield on the 10-year Treasury note, which had fallen in recent days to just over 2.30%, now back up to 2.44%. Finally, our markets are looking a tad weaker so far this morning as traders await the pending changes in Washington. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
