After The Close
The stock market started quite positively today, rebounding well off of yesterday’s lows. A news report stated that Apple (AAPL – Free Apple Stock Report) plans to boost iPhone production by 10% when compared to the first half of 2019. Given the company’s weight in the Dow Jones Industrial Average and S&P 500, the substantial price movement pushed the indices higher. However, quarterly earnings reports and the new 2020 outlooks for 3M (MMM – Free 3M Stock Report) and Pfizer (PFE – Free Pfizer Stock Report) were not as well received by the market, which caused the Dow to rise less than the other composites. The indices rose steadily throughout the session and ended not far from the highs of the day. All told the Dow closed higher by 187 points, the S&P 500 was up 33 points, and the NASDAQ rose 130 points.
Moreover, market breadth was very positive, as advancers outpaced decliners by a 2.5-to-1.0 ratio. Technology stocks were among the best performers of the day, while consumer staples were among the weakest, though still ending on the plus side.
In commodity news, oil prices rose today, thanks to OPEC agreeing to extend production cuts until June. This stopped a multiday slide in energy prices. Meantime, U.S. Treasury bond yields were higher, as a move away from the safe-haven asset occurred. Too, the yield curve steepened a bit. The VIX Volatility Index fell, as demand for options protection declined.
Looking to tomorrow, all eyes will be on the U.S. Federal Reserve at its Open Market Committee meeting, at which it will announce its interest-rate policy. Though the market expects no changes in interest rates at this meeting, traders will be looking to see if there is any revision to the long-term outlook. Too, the economic calendar will be full of data releases, including the Energy Information Administration’s weekly report on crude oil inventories.
Additionally, earnings season will continue in earnest, with several large companies expected to release quarterly results. These include Dow-30 components Boeing (BA – Free Boeing Stock Report) and McDonald’s (MCD – Free McDonald’s Stock Report) before the bell and Microsoft (MSFT – Free Microsoft Stock Report) after the close. Too, trading will likely be affected by Apple’s earnings report after the bell today. Overall, we think the market could be volatile tomorrow.
– John E. Seibert III
At the time of this article’s writing, the author held positions in some of the companies mentioned.
Before The Bell
The first day of the final trading week of January was dominated by the bears. Indeed, the major equity averages started the session deep in the red and bears never relinquished their hold during the worst trading day since October. During a week that will bring a plethora of reports from the earnings and business beats, as well as the latest decision on monetary policy from the Federal Reserve, the first trading day was driven by news on the outbreak of the Coronavirus in China and the reports of a few cases in the United States. The emerging health worries, along with concerns about what impact the virus will have on the performance of China’s economy and the health of the global economy, unnerved investors and resulted in the second-consecutive bearish session on Wall Street.
The sizable losses to end last week were further compounded by another big setback yesterday on Wall Street. As noted, the main indexes, both here and overseas, spent all of Monday’s session deep in negative territory. At one point, the Dow Jones Industrial Average was down nearly 500 points before settling the bearish session with a loss of 454 points (or -1.6%). In general, the selling was broad based, with the index of 30 bellwether companies matched stride for stride by both the NASDAQ Composite (down 176 points) and the broader S&P 500 Index (52 points lower). From a sector perspective, it also was a sea of red ink, with even the most defensive categories (i.e., utilities, consumer staples, and telecom) finishing south of the neutral mark. There was clearly a “flight-to-safety” strategy in play, with investors fleeing the economically sensitive groups. In fact, the basic materials, energy, and technology sectors posted losses of more than 2% yesterday afternoon. Overall, declining issues swamped advancers on both the Big Board and the NASDAQ.
As noted, there was clearly less of an appetite to hold riskier stocks yesterday. Investors that have moved out of equities have parked their funds in fixed-income securities, higher-yielding and defensive-oriented equities, and gold. The yield on the 10-year Treasury note, which moves inversely to the price, fell to 1.60% (a multi-month low), as investors gobbled up the more secure investments. Likewise, the price of gold, which was up at the end of last week, climbed another $9.70 a share yesterday.
Looking to the day at hand, equity investors are clearly hoping that a heavy slate of earnings and economic news to come this week, as well as the latest Federal Reserve monetary policy decision will calm jittery investors a bit. This morning, we were to receive quarterly results from three Dow-30 components: Pfizer (PFE – Free Pfizer Stock Report), United Technologies (UTX – Free United Technologies Stock Report), and 3M Company (MMM – Free 3M Company Stock Report). The results were mixed with Pfizer and 3M Company falling short of earnings expectations, while United Technologies topped the consensus target. That said, investors will likely be most interested to see how technology titan Apple (AAPL – Free Apple Stock Report) did after today’s closing bell. These four quarterly releases are the first of 14 reports from Dow-30 companies this week. The five-day stretch of earnings news will be capped off on Friday by reports from oil producing giants Exxon Mobil (XOM – Free Exxon Mobil Stock Report) and Chevron Corp. (CVX – Free Chevron Stock Report). The energy stocks have performed poorly in recent sessions, as crude prices both here and on the Continent have fallen, as concerns about the impact of the Coronavirus on the global economy, particularly that of China, intensify.
With less than an hour to go before the start of the new trading session on Wall Street, the equity futures are indicating some bargain hunting in the U.S. stock market after the worst showing since October. So far overseas, the mood has been mixed. The main indexes in Asia, particularly those of China, recorded sizable losses again, while the major European bourses staging a partial recovery after yesterday’s notable selling on the Continent. Our sense is that investors are hoping the focus of Wall Street shifts from the Coronavirus to the latest results from Corporate America and the business beat. 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.
