After The Close
The stock market started the day modestly higher, as some decent earnings reports boosted investor confidence. Indeed, the Dow Jones Industrial Average was up by almost 150 points at its apex, while the S&P 500 and NASDAQ were higher in tandem. However, the markets started to selectively fall, as fears about the likelihood of a trade deal with China crept in. These concerns appeared to be short lived, and the markets bounced in the final portion of the trading session. All told, the Dow finished the day higher by around 52 points, while the S&P 500 slipped about four points, and the NASDAQ fell 57 points.
Additionally, market breadth was positive, as advancers outpaced decliners by a 1.5-to-1.0 ratio near the close. Industrials stocks were among the best performers, helped by solid quarterly results from 3M Company (MMM – Free 3M Stock Report). On the other hand, communications equities were among the weakest, as a lackluster report from Verizon (VZ – Free Verizon Stock Report) dragged down the sector.
In commodity news, oil prices were higher today in response to the U.S. putting sanctions on Venezuelan oil. In addition, gold prices rose alongside economic uncertainty. U.S. Treasury bond yields fell, and the yield curve flattened a bit. This was likely the result of a flight to safety. Also, the VIX Volatility Index was modestly higher, as demand for options protection rose.
Looking ahead, tomorrow may be the busiest news day of the quarter, as the U.S. Federal Reserve is expected to release its latest interest-rate decision. Most expect the target federal funds rate to be held steady at between 2.25% and 2.50%, though the written statement will be dissected to gain insight into future Fed policy decisions. In addition, the Energy Information Administration’s status report on crude oil inventories will likely move that commodity, while the first estimate for 2018 fourth-quarter GDP should be released.
On the earnings front, four Dow Components are expected to issue their latest quarterly results, including Boeing (BA – Free Boeing Stock Report) and McDonald’s (MCD – Free McDonald’s Stock Report) before the market opens, and Microsoft (MSFT – Free Microsoft Stock Report) and Visa (V – Free Visa Stock Report) after the closing bell. In addition, tomorrow is expected to be the busiest earnings day for all other companies. Too, Apple’s (AAPL – Free Apple Stock Report) earnings report, which was released after the market closed today, will likely move the market tomorrow.
- John E. Seibert III
At the time of this article’s writing, the author may have positions in any of the companies mentioned.
Before The Bell
Following a very strong week within a memorable month thus far, the stock market opened lower yesterday morning. And did so with a thud. Concerns about the outcome of the three-week pause in the budget fight and, more to the point, a pair of worrisome earnings releases from two high-profile industrial companies brought the multi-week market rally to an abrupt halt. The two companies in question were Caterpillar (CAT – Free Caterpillar Stock Report) and Nvidia (NVDA). Both stocks sold off sharply as did the stock market in general at the open.
The early pullback was essentially brought about by disappointing forecasts from these two enterprises. In the case of Caterpillar, a component of the Dow Jones Industrial Average, the company badly missed on the bottom line and gave a lackluster outlook. In doing so, the heavy machinery maker blamed lower demand in China for its profit miss. As for Nvidia, that chip maker put the onus on China as well, citing weakened consumer demand for its gaming graphics processing units.
These twin misses and concerns ahead of a plethora of upcoming profit issuances in the coming days, meanwhile, combined to take the market down precipitously in the first hour of trading, with the Dow tumbling more than 300 points. At the opening hour low, that composite was off about 390 points. Of course, it is more than just earnings that are out there to vex investors. There also is the recent government shutdown, which has not really been resolved as yet. There also are trade concerns with China.
However, through it all, the bulls have put on a January show, with the current month being the best opening 31-day span since 1987. Of course, what could tip the scales this week would be some additional dour earnings reports, such as we received yesterday morning. Meantime, the selloff would continue and carry the Dow to a loss of more than 400 points as the noon hour struck in New York. In fact, even as we bounced a bit off of those lows in the next hour, the Dow still was lower by some 350 points.
As the afternoon moved further along, stocks were still notably lower, with the upcoming FOMC meeting, to begin shortly, on the minds of investors, as well. Expectations are that the central bank will not raise interest rates this week, or perhaps for most of this year, as the economy seems as though it will be slowing in the months ahead. There also are some fears that we could face a possible recession in 2020. That possibility almost ensures that we will not have further fates increases in the coming months.
The equity market, as has been the case on numerous occasions in the past year, started to recover from its steepest losses in the afternoon. All told, from a deficit just north of 400 points, the Dow pared about 50% of its morning loss by the time the results were in. On point, the composite would close off by 209 points, while losses of 21 points and 79 points would be inked by the S&P 500 and the NASDAQ, respectively. Still, the day had a materially bearish tilt to it.
Looking out to a new day, we see that the principal indexes were mostly lower in Asia overnight. In Europe the main bourses are trading with gains thus far today. Also, oil prices are up and Treasury note yields are essentially flat so far. All of this suggests that U.S. equities are set to open in lackluster fashion when live trading resumes. As to the big events today, there will be more on the earnings front and the start of the latest FOMC meeting.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
