After the Close
Stocks were weak this morning, but managed to partially recover as the session progressed. At the close of trading, the major averages were in negative territory. The Dow Jones Industrial Average was off 27 points; the broader S&P 500 Index was down six points; and the NASDAQ was off just nominally. Market breadth showed a divided market, with advancers slightly leading decliners on the NYSE. From a sector perspective, the energy and industrial issues were areas of weakness, while the technology and basic materials names bucked the downtrend.
There were no major economic news items issued this morning. This left traders free to look at the situation overseas. Further, many on Wall Street were likely speculating about the direction the U.S. economy might take under the newly installed President. Tomorrow should be a bit busier, as existing home sales for the month of December are due to be released. For those interested in the housing market, the new home sales report will follow on Thursday.
Elsewhere, the fourth-quarter corporate earnings season is starting to unfold. We heard from a few widely held companies today. In the Dow Industrial Average, shares of McDonald’s (MCD - Free McDonald's Stock Report) slipped, as investors, while pleased with improvements overseas, had concerns about somewhat sluggish operations on our shores. Elsewhere, in the energy area, shares of Halliburton (HAL) also declined in response to a mixed release. Tomorrow will be a busier day for corporate profits reports, as several leading names are scheduled to weigh in with their numbers.
Technically, stocks have been somewhat range bound lately. However, the situation may soon change, as the earnings season progresses, and investors see how the new political administration shapes up. – 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 the session to the downside this morning and remains in negative territory as we approach the midday hour on the East Coast. It appears to be the case of some profit taking after Friday’s move to the upside. The market did not get much of a boost from the corporate world today and, perhaps, there is some nervousness among investors as they await some news from Washington on President Trump’s pledges to sign executive orders to reverse many of former President Obama’s executive actions.
In general, the selling has been somewhat contained, with most of the major averages off less than a half of a percentage point. This may leave an opening for the bulls to try to change the tide of trading in the second half of today’s session. In a positive sign, the spread between declining and advancing issues on the NYSE is rather thin. However, we still think that the bulls would need some assistance from Washington if they are going to mount a comeback. Their cause could get a boost if news surfaces that President Trump has begun the process to eliminate some of President Obama’s regulations. This morning several news outlets reported that President Trump plans to sign an executive order today to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico. Also President Trump just concluded a meeting with the CEOs of many of the nation’s largest manufacturers, with the purpose of creating more domestic manufacturing jobs.
From a sector perspective, it is mostly down arrows among the 10 major equity groups. The biggest laggards are the energy, healthcare and industrial categories. The energy stocks are feeling the effects of lower crude prices on both the New York Mercantile Exchange and on the Continent. And the healthcare stocks are down as jitters remain about what effect the likely repeal of the Affordable Care Act under the new Administration will have on the fortunes of the managed care providers, hospitals, the biotech companies and the drugmakers. Conversely, we are seeing some buying interest in the telecommunications and utilities areas, which may be a product of some of the aforementioned concerns on Wall Street today. The S&P 500 Volatility Index (or VIX), which has fallen sharply since the November Presidential Election, is nearly 5% higher today.
Also contributing to the selling is the lack of many positive stories from Corporate America. Fast food giant and Dow-30 company McDonald’s (MCD - Free McDonald's Stock Report) did beat expectations on both the top and bottom lines in the latest quarter, but investors appeared to be left wanting more on the company’s outlook, and the stock is down nominally today. Meanwhile the non-earnings news from the corporate world was not uplifting. Yahoo! (YHOO) shares are lower following news that the Securities and Exchange Commission is looking into whether the company should have told investors about its two disclosed data breaches sooner. The news is even worse for Qualcomm (QCOM) after reports surfaced that technology behemoth Apple (AAPL - Free Apple Stock Report) filed a lawsuit against the company accusing it of overcharging for chips and refusing to pay some $1 billion in promised rebates. This comes only a few days after the Federal Trade Commission accused Qualcomm of abusing its market dominance. The allegations are being denied by Qualcomm, but the shares are nonetheless suffering from the news. – 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
The U.S. equity averages rallied on Friday, with the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index posting respective advances of 95, 15, and eight points. It was a good conclusion to a week that overall went to the bears, with the aforementioned indexes finishing with modest losses for the holiday-abbreviated four-day stretch of trading. During the week’s final session, the market was helped by decent news from Corporate America, including better-than-expected December-period earnings from International Business Machines (IBM - Free IBM Stock Report) and a positive report from Procter & Gamble (PG - Free Procter & Gamble Stock Report), and the promise of more business-friendly policies from President Trump, who took the oath of office on Friday.
It was a pretty encompassing move by the bulls, with notable gains in the small and mid-cap sectors, as well. There were far more advancing than declining issues on both the New York Stock Exchange and the NASDAQ, and on heavy trading volume. From a sector perspective, nearly all of the 10 major equity groups finished in positive territory, with only the healthcare sector failing to join the party. The healthcare sector was hurt by news that President Trump’s first executive order was to start the process to repeal the Affordable Care Act. Conversely, the leadership came from the basic materials, financial, and consumer staples groups.
Turning to the week at hand, the investment community will have a lot to digest, with the earnings season heating up, including the latest quarterly results from 13 Dow-30 companies. Before the opening bell this morning, McDonald’s (MCD - Free McDonald's Stock Report) reported its latest quarterly results, beating expectations on both the top and bottom lines. Investors will also receive some reports from the business beat, with data on new and existing home sales and the first estimate of fourth-quarter GDP. And to top it off, the new week is expected to bring a bevy of news from Washington, with President Trump expected to sign a number of executive actions to undo a number of former President Obama’s executive orders, and Congress expected to confirm most of the President’s cabinet appointees. According to numerous reports this morning, President Trump is expected to sign an executive order as early as today to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico.
With less than a half-hour to go before the commencement of the new trading week stateside, the equity futures are pointing to a modestly lower opening for the U.S. equity market. Looking overseas, the main stock averages were mixed in Asia overnight, with Japan’s Nikkei falling by more than 1%, and on the Continent, the major European bourses are all modestly in the red as trading moves into the second half of the session. Investors should also note that the price of oil is down in both New York dealings and on the Continent, which may weigh on the performance of the energy sector in the early going this morning. Against this backdrop, it is looking like the bears will throw the first punch in this very busy week for Wall Street. 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.
