After The Close
The stock market got off to a higher start this morning, but quickly sold off. Then, it managed to move higher in the afternoon, but surrendered most of its gains late in the day. Today, investors seemed willing to look beyond the coronavirus outbreak taking place in China, in order to concentrate on the corporate reporting season. However, the situation is still quite unsettling. At the close of trading, the Dow Jones Industrial Average settled up 12 points; the broader S&P 500 Index was off three points, and the NASDAQ was higher by five points.
Market breadth was mixed, with advancers about even with decliners on the on the NYSE. From a sector perspective, the consumer, industrial, and healthcare names made some progress, while the basic materials stocks lagged the pack.
Meanwhile, in economic news, pending home sales dipped 4.9% during the month of December, where a better figure had been expected. In addition, today the Federal Reserve wrapped up its two-day FOMC meeting, weighing in with an interest-rate decision, and offering some comments about the broader economy and the dire health crisis gripping China. Of note, the central bank decided to leave the key rate unchanged, which was in keeping with the consensus opinion.
In corporate news, the fourth-quarter earnings season continues to unfold. Today, shares of Apple (AAPL – Free Apple Stock Report) moved nicely higher in response to an upbeat report, featuring a resurgence in its iPhone franchise, and strong showings from its services and wearables segments. Nonetheless, this news was overshadowed by some weaker reports from leading chipmakers. Furthermore, a report from Starbucks (SBUX), suggesting that the coffee seller’s outlook could be dampened by ongoing problems in China, did not help matters.
Technically, the market seems to be holding up reasonably well, despite the disruptions taking place in China. It remains to be seen if those problems will worsen, and possibly create a more meaningful pullback in equities on our shores.
– Adam Rosner
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, which raced through the first three weeks of January with nary a hiccup along the way, ran into some headwinds to close out last week, with a modest retreat in the leading averages, and really hit a brick wall to start out the new week on Monday, as the Dow Jones Industrial Average tumbled by 454 points and the NASDAQ, as under pressure in the tech space, gave back 176 points. The seeming reason for this about face was the fear of the spread of the deadly coronavirus well beyond China.
Then, following Monday's pummeling, in which the Dow and the S&P 500 each saw their biggest one-day declines since October, stocks turned the corner yesterday morning. In fact, after opening the latest session modestly to the upside, the indexes quickly strengthened, so that after the first hour of trading, the 30-stock blue-chip composite was up by more than 200 points, while the tech-heavy NASDAQ had advance by over 100 points. This comeback came notwithstanding the persisting fears about the spreading coronavirus.
As far as other influences, the Conference Board issued its latest monthly survey in which confidence was reported to have increased in January, rising to 131.6 following a moderate increase in December. The latter tally had been 128.2. The primary impetus for the latest increase was due to a more positive assessment of the current job market and greater optimism about future job prospects. This survey also helped to underpin the morning rally in stocks. But the main preoccupation remained the coronavirus.
With regard to the market, equities rolled into the afternoon holding healthy gains, with the Dow's rise cresting at 288 points at around 2:00 PM (EST). The NASDAQ's spike higher would reach 150 points early in the afternoon. There would subsequently be some backtracking during the final two hours, especially in the Dow, which would give back about a hundred points, so that at the close, the blue chips would be up by a still-formidable 187 points, while the NASDAQ would ink a 130-point increase.
This recovery came about even as investors worried over the potential impact that the coronavirus could have on the global economy. The worries are greatest across industries involved in travel, tourism, restaurants, and retail. In all, more than 4,500 people in China have been infected by the virus with just over 100 succumbing to the disease. The other big issue is earnings. On this count, tech bellwether Apple Inc. (AAPL – Free Apple Stock Report) rose nearly $9.00 a share during the regular session and then jumped $5.00 a share more on an earnings beat after the close.
Finally, the Federal Reserve began its two-day FOMC meeting yesterday; it will conclude this afternoon with the likelihood of no change in interest rate policy.
In the meantime, a new day is upon us and after yesterday's strong rebound, the solid earnings outcome at Apple, and the continuation of the FOMC meeting, the equity futures are pointing to a bullish opening when trading resumes a little later this morning.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
