After The Close
The stock market opened sharply lower this morning, and only partially rebounded during the afternoon. At the end of trading, the Dow Jones Industrial Average was down roughly 210 points; the S&P 500 Index was off 21 points; and the NASDAQ was lower by 79 points. Market breadth showed a negative bias to the session, with losers outpacing winners on the NYSE. From a sector perspective, the technology, healthcare, and basic materials issues lost ground, while select consumer stocks fared a bit better than the broader market.
In economic news, there were no major items reported today. However, on Wednesday, the Federal Reserve will weigh in with an interest-rate decision, and on Friday, the government will deliver the January employment numbers.
Meanwhile, the fourth-quarter earnings season continues. Today, Caterpillar (CAT – Free Caterpillar Stock Report) delivered a disappointing report, noting a challenging operating environment. Further, shares of NVIDIA (NVDA) sank, after the semiconductor company tempered its guidance, mentioning weakness in China. The news likely stoked investor fears about the outlook for the larger technology sector, which likely led to weakness in some related names. Tomorrow after the market closes, Apple (AAPL – Free Apple Stock Report) will deliver its report, and that issuance may well shed some light on the situation.
Technically, the stock market rally that started at the beginning of 2019 remains in place. The S&P 500 Index is sitting above its 50-day moving average, located at the 2,610 level. It is not clear what will serve as the catalyst needed to push stocks higher from here. Some solid corporate profit reports would likely help matters. Further, improved trade relations with China would also be a major plus.
– Adam Rosner
At the time of this article’s writing, the author had a position in Nvidia (NVDA)
Before The Bell
The most recent week of trading on Wall Street took investors on a rollercoaster ride. The abbreviated trading week stateside began on Tuesday—the U.S. equity market was closed last Monday for the Martin Luther King holiday—with a big showing from the bears. Concerns about slowing growth in China, the continued impasse in trade talks between the United States and China, and a weak report on existing home sales brought out the sellers. The major indexes then traded in a tight band the next two days before the bulls responded with a big move of their own to end the week. When all was said and done, the market still remains on track for a winning month in January. A mostly supportive fourth-quarter earnings season so far has helped the bulls, which took a beating during the final quarter of 2018.
As noted, the major equity indexes performed well on Friday, with respective rallies of 184, 91, and 22 points for the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index. The move to the upside was fueled by reports that the U.S. and China were making some progress with regard to trade and another batch of mostly encouraging fourth-quarter earnings releases. News that the U.S. government shutdown had ended (the President and Democratic leaders agreed to open the government for three weeks while they continue to try to reach new budget deal) did not have much of an impact on trading. For the session, advancing issues led decliners by a notable margin on both the New York Stock Exchange and the NASDAQ, with the leadership coming from the technology group. The technology gains came despite a weak showing from Intel (INTC - Free Intel Stock Report) stock following the tech giant’s latest quarterly report on Thursday afternoon.
Meanwhile, the week at hand promises to be a very busy one. Investors will again be watching the trade talks between the U.S. and China and will receive another heavy dose of earnings reports, culminating with Friday’s reports from Dow-30 members and oil giants Exxon Mobil (XOM - Free Exxon Mobil Stock Report) and Chevron Corp. (CVX - Free Chevron Stock Report) (more on oil below). Earlier this morning, Dow-30 component Caterpillar (CAT - Free Caterpillar Stock Report) posted weaker-than-expected fourth-quarter results and lowered its full-year 2019 outlook, blaming a slowdown in construction business in China; CAT shares are trading lower in pre-market action on the report. In addition to trade and earnings news this week, the investment community will be focused on the Federal Reserve, which will hold its two-day monetary policy meeting. The prevailing sentiment is that the central bank will hold interest rates steady this month, and thus investors will be more interested in what the Federal Reserve says about the coming months. Recently, the lead bank has struck a bit more dovish stance than investors would have envisioned as little as three months ago. Finally, with the U.S. Federal government reopening over the weekend, the economic news will be heavy, as some delayed reports may be released. As it currently stands, we will receive a number of important reports this week, including the latest data on consumer confidence, personal income and spending, manufacturing activity, employment and unemployment, and the initial reading on fourth-quarter GDP.
With less than an hour to go before the commencement of the new trading day stateside and the aforementioned heavy week of data, the equity futures are indicating some selling is on tap when the U.S. stock market opens. Overseas, the main indexes in Asia finished lower overnight, while the European bourses are trading in the red. We are seeing some nervousness in the world’s equity markets ahead of what may be a crucial week for global trade talks and the pending FOMC meeting, which begins tomorrow. In other news, the price of oil both here and in Europe is down today on reports showing that the U.S. rig count rose for the first time this year. Stay tuned.
- William G. Ferguson
