After The Close
Stocks showed more volatility today than has been the case lately in choppy trading at midweek. The recent string of seemingly endless moves higher in the major averages was interrupted, notably on the NASDAQ, which closed 45 points to the downside. Meanwhile, the Dow Jones Industrial Average finished 41 points higher and the S&P 500 was off slightly.
Market breadth was negatively biased, with decliners ahead of advancing issues on the New York Stock Exchange and to a greater extent on the NASDAQ. But in a sign of the market’s strength this year, the number of stocks touching fresh 52-week highs widely outpaced those hitting new lows.
A down day for the technology sector weighed on performance. Sentiment toward Dow-30 component and industry leader Apple (AAPL - Free Apple Stock Report) has been hurt recently by a couple of ratings downgrades from analysts, and the stock moved lower for the session. There is some thinking that upcoming unit shipments won’t be all that exciting. Even so, the stock still has support in some corners on Wall Street, so the mood isn’t entirely bearish.
However, there is also a feeling in the tech space that the cycle for semiconductor manufacturing is at, or near, a peak. For instance, Texas Instruments (TXN) gave a forecast for only modest growth ahead. That news disappointed investors and sent the shares lower.
Airline stocks were weak, too, on fears of increased capacity.
The investment community also had to handle concerns about shifting international trade patterns. The introduction of tariffs in the United States on certain products made overseas raised the possibility of retaliation on the part of foreign competitors and higher prices for U.S. consumers.
In economic news, the National Association of Realtors reported that December sales of existing homes fell more than expected as a result of not-enough inventory on the market. The supply of homes available to be purchased was reported to be a very low 3.2 months, versus the six-months of supply considered normal.
Overall, today’s see-saw market action stood in contrast to recent, more uniform, daily moves higher in stock prices. But one day doesn’t make a trend and equities still have to be considered in an upturn.
Tomorrow, we will get data on new-home sales, while the stream of earnings reports from Corporate America continues.
— Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The stock market, a big winner on Monday following the abrupt end to the short government shutdown, started yesterday's session with a collective yawn, beginning festivities on a decidedly mixed note, save for the NASDAQ, which continued to forge ahead after Netflix (NFLX) stock jumped more than 10%, on word that the video streaming giant had enjoyed higher-than-expected subscriber growth. Elsewhere, the market lagged somewhat, with several losers on the Dow Jones Industrial Average, soon pulling that index lower. Overall, as noted, the market had an early uneven quality to it.
On balance, the news remained supportive, especially on the revenue and earnings fronts, where a number of high-profile names reported beating sales and earnings estimates. That was especially so for the Dow, where the latest session saw healthy reports from medical supplies company Johnson & Johnson (JNJ – Free Johnson & Johnson Stock Report) and household products maker Procter & Gamble (PG –Free Procter & Gamble Stock Report). However, both stocks weakened on the news, as investors apparently wanted still more. That said, such weakness could not stop the market for very long, and after a mid-morning pause, the bulls regrouped.
There was no buying surge, to be sure, but the Dow did erase a brief 70-point early loss, and move toward the breakeven line as the morning concluded, while the NASDAQ, boosted by some strong individual tech performances, stormed ahead by nearly 50 points. Also, the smaller-cap composites, off early, edged into the black as we reached the afternoon. It seemed as though concerns about a possible subsequent government shutdown in early February, were not affecting sentiment as the session moved along. With earnings on the rise, Washington is not on the front burner, at this time.
Things changed very little as the afternoon moved along, with the NASDAQ retaining a 40-point plus gain as the Dow meandered in and out the plus column with little conviction in either direction. As before the other indexes remained in the black, with the Dow under pressure, as before, from Johnson & Johnson and Procter & Gamble. Helping, for a change, were shares of battered General Electric (GE – Free General Electric Stock Report), which gained some 4.5%, following a string of daily losses thus far in the new year. It was the biggest one-day rise in that stock in some two years and came ahead of this morning's release of fourth-quarter results.
Meanwhile, following a quiet economic news day yesterday, the National Association of Realtors is expected to issue its December reading on sales of existing homes. That release is scheduled for 10:00 (EST) this morning. The report will be followed tomorrow by data on the leading indicators, jobless claims, and sales of new homes. Finally, the week will conclude with Friday's issuances on orders for durable goods and fourth-quarter GDP. Important as these reports are, however, the big news will continue to come from the corporate arena, where sales and earnings have been routinely beating forecasts.
In fact, as of yesterday, 76% of the S&P 500 companies had surpassed profit forecasts; the number was even higher, 84%, on the revenue line. As for the market, it closed in a positive manner, with all of the averages ahead, save for a slight dip in the Dow. The advance, meantime, continued to be led by the NASDAQ, which gained 52 points. Overall, gaining stocks led losing issues by a better-than three-to-two count on the Big Board, while six of the top ten equity groups ended higher, led by the utility sector, as falling bond yields helped that group.
Looking out to the middle session of the week, we see that shares in Asia were mostly higher overnight, while in Europe, the early read is lower following some mixed earnings releases. Also, oil is trading slightly higher in New York, but a bit lower in Europe and Treasury yields, off a bit yesterday, are now passing hands at 2.63%, up nominally. Finally, U.S. equity futures are positioning themselves for a nicely higher opening at 9:30 (EST) this morning, ahead of the report on existing home sales.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
