After The Close
The market opened slightly lower today, as fears increased about the reduced possibility of an imminent trade deal with China. This was partially exacerbated by U.S. Secretary of Commerce Wilbur Ross stating that the two countries were not close to striking a deal. Early trading was choppy, as a few strong earnings reports buoyed the broader market, and some good economic news, including a new low in jobless claims, aided stock prices. However, the market started to slip just before noon, and the change in direction caused the indices to hit their session lows. At that point, the Dow Jones Industrial Average was down by as many as 152 points. The other indices fell in tandem, before a move back toward near even occurred. Altogether, the Dow finished down 22 points, while the S&P 500 closed higher by around four points, and the NASDAQ was up about 48 points.
Though the markets closed the day near the prior close, sentiment was quite positive throughout the day. Indeed, advancers outpaced decliners by a 2.2-to-1.0 ratio at one point. Technology stocks were among the leaders, as a few quality earnings reports boosted the prices of semiconductor equities. On the other hand, consumer staples were among the weakest performers today, as tobacco-related names fell considerably.
In commodity news, crude oil prices rose, as worries about Venezuelan output occurred. Political instability there appears to be reaching new heights. Meantime, U.S. Treasury bond yields fell on the day, though the VIX Volatility Index also traded lower. These two entities often trade in opposite directions.
Looking ahead, earnings season will continue in earnest tomorrow, as a number of companies release their fourth-quarter results. Trading will likely be affected by Intel (INTC – Free Intel Stock Report). The company released earnings after the closing bell today, and the stock initially fell in after-market trading.
- John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The stock market, off sharply to start the holiday shortened week on Tuesday, bounced back strongly yesterday morning, to largely erase the aforementioned losses. As for the abrupt reversal, the earlier declines were occasioned by evolving worries about slowing global economic growth, with data out of China and the International Monetary Fund affirming such weakness. Investors also were chagrined by news of a sharp setback in sales of existing homes in December. That report, issued shortly after trading began here on Tuesday, affirmed that such activity declined by 6.4% last month.
Then yesterday, while acknowledging that such problems were still with us, investors got a respite on news of exceptionally strong quarterly earnings from a trio of heavyweights domiciled on the Dow Jones Industrial Average. Specifically, stellar profit reports were issued by technology icon International Business Machines (IBM – Free International Business Machines Stock Report), aerospace giant United Technologies (UTX – Free United Technologies Stock Report), and household products behemoth Procter & Gamble (PG –Free Procter & Gamble Stock Report). Those strong performances and consequent sharp early run-ups in the stocks, helped the Dow Jones Industrial Average, a 302-point loser on Tuesday to get out to a 295-point advance early yesterday.
However, when those early gains could not be expanded upon, the sellers returned, and stocks gradually lost their footing. Indeed, while the Dow stubbornly held on to small gains into the noon hour, the S&P 500 Index and the tech-laden NASDAQ both fell into the red by late morning. As to earnings, the performance so far has been good, in the main, with more than 72% of the companies reporting thus far having exceeded consensus expectations. However, the magnitude of the improvement has been somewhat less than in most recent quarters.
As to other issues, White House advisor, Larry Kudlow indicated that a meeting between trade officials from the United States and China had been canceled. That did not boost confidence. Meantime, as the morning ended, the Dow joined the other equity indexes and fell into the red. It would seem, to this point, that earnings were bringing just temporary relief, and that the growing economic headwinds and concerns about the lengthening government shutdown were holding sway on the Street. Comments from another Administration official that there might be no GDP growth in the current quarter due to the shutdown also didn't help.
The noon-day losses then steepened for a time, with the Dow actually falling to a session-worst deficit of just about 100 points. But that quick descent would soon halt, so that as the afternoon began, a recovery would set in led once more by the blue chips. This latter group, as noted, was aided by strength in IBM, PG, and UTX. With solid gains by those issues still in hand, the Dow would move back up steadily into the close, finally posting a gain of 171 points. Things were less in sync on the S&P 500 Index and the NASDAQ, with both composites flirting with the breakeven market for much of the remainder of the session.
All told, and in addition to the Dow's closing advance of 171 points, the S&P 500 ended six points higher and the NASDAQ rose five points. The smaller indexes fared a little less well. In essence, this was a very narrow win, with no discernible strength in the advance-decline line. Looking out to a new day now, we see that shares in Asia were mostly higher last night; in Europe, the early action in the bourses is positive, as well. Also, oil prices are down and Treasury note yields, up yesterday, now are lower so far this morning. Finally, the U.S. equity futures are pointing to a stronger opening when trading resumes.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
