After The Close
U.S. futures started in the red today, as fears grew about how widespread the Coronavirus had become. The number of cases and deaths related to the disease jumped overnight in China, causing worries about the global economy in 2020. Once the stock market opened, the Dow Jones Industrial Average was lower by 245 points in short order, despite Microsoft (MSFT – Free Microsoft Stock Report) and Coca-Cola (KO – Free Coca-Cola Stock Report) reporting better-than-expected quarterly results and outlooks. The other indices fell in tandem. However, the good earnings results somewhat buoyed sentiment and stocks rose for a spell. But once the World Health Organization declared the virus a global health emergency, the indices sank again – but did not reach new lows. In the final portion of the session, the composites pared a significant portion of their losses; they trended higher in the final hour. In fact, all three of the major indices had reached the green by the end of the day. On point, the Dow closed higher by 125 points, the S&P 500 was up 10 points, and the NASDAQ was ahead 24 points.
Moreover, market breadth was rather directionless, as advancers and decliners were about even on the day. Financials were among the strongest performers, likely aided by news that the Fed would reduce its restrictions on what risky assets banks could invest in. However, telecommunications stocks were weaker today. Too, Facebook (FB) issued a lackluster earnings report.
In commodity news, oil prices sank today, as fears about global trade continued to grow. Meantime, U.S. Treasury bond yields were largely lower across the board as a move into the safe-haven asset occurred. The VIX Volatility Index was higher, as demand for options protection increased.
Looking ahead, tomorrow should have plenty of economic data releases on the docket, including the University of Michigan Consumer Sentiment Index for January. Additionally, personal spending and personal income for December are on the docket. In earnings news, several Dow-30 companies will release quarterly results, including Chevron (CVX – Free Chevron Stock Report), Caterpillar (CAT – Free Caterpillar Stock Report), and Exxon Mobil (XOM – Free Exxon Stock Report). Meantime, Dow component Visa (V – Free Visa Stock Report) will report after the bell today. Overall, we think the market will focus on earnings results and any developments with the Coronavirus.
– John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
Before The Bell
After largely reversing the stock market's steep decline on Monday in yesterday's impressive comeback session, equities bounded out of the gate yesterday, propelled higher by the impact of better-than-expected earnings from a pair of Dow Jones Industrial Average heavyweights, Apple Inc. (AAPL – Free Apple Stock Report) and Dow Inc. (DOW – Free Dow Inc. Stock Report). In all the blue chips jumped by more than 200 points at the open, before some profit taking set in. This impressive upsurge came about ahead of the conclusion of the Federal Reserve's latest FOMC meeting and even with the global concerns emanating from the fast-spreading coronavirus.
As to the Fed meeting, this get together produced, as expected, no change in interest rates. (See below.) It seems as though the economy is strong enough to not need added help at this time, but slow-growing enough to keep away any monetary tightening. In the meantime, the stock market continued to soften after that brief burst and after the first half hour had passed, the leading averages were mixed, with the Dow still up; the S&P 500 flat; and the NASDAQ slightly lower. The Dow was largely being kept in the black by a significant increase in the price of the aforementioned Apple stock, as well as in Dow shares.
Then, after that brief profit taking, the market steadied and began to improve once more, so that by 11:00 AM (EDT), the Dow was back up by 150 points while the S&P 500 was ahead by 10 points and the NASDAQ, which had been in the red momentarily, was in the plus column by 18 points. The gains would then continue until near the noon hour when a second doze of profit taking set in. But the selling was more limited as we neared the FOMC meeting's conclusion. Overall, the day was dominated by earnings, as economic reports were limited following Tuesday's major issuance on consumer confidence.
The stock market would strengthen further as we approached the Fed's meeting conclusion, with the indexes recapturing much of the morning's advance on optimism that the Fed will remain supportive on the monetary front. The advance then would continue after the meeting's end. Regarding the Fed, it changed the accompanying language little from the last meeting, in which is also kept rates level, suggesting that consumer spending remained fairly solid, but that it was concerned that inflation remained below the bank's 2% target. It acknowledged that it would be comfortable if inflation edged above its target for a while.
The market then continued on its merry way as we entered the final hour of trading, with the Dow still up by 120 points at 3:00 PM. However, stocks soon gave additional ground, with the Dow's rise easing back below 100 points. Still, helped by an increasing gain in shares of Apple and Boeing (BA – Free Boeing Stock Report) that index held in the plus column, albeit barely, as did the NASDAQ and the S&P 500. But the S&P Mid-Cap 400 and the small-cap Russell 2000 edged lower, along with bond yields, which eased back below 1.60% on the 10-year Treasury note. The VIX volatility index also eased back.
In all, at the close, the Dow would retain just a 12-point gain, while the NASDAQ would tack on five points and the S&P 500 would lose three points. All in all, it was a mixed day at the close following some strong improvement early in the session. Now, looking ahead at the penultimate day of the week and the month of January, which has been something of a mixed affair, in general, we see that the early read on the futures is for a weaker opening, on growing coronavirus fears. All of this comes ahead of data on personal income, consumer spending, and consumer sentiment tomorrow.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
