After the Close
Stocks retreated this morning, but managed to partially recover in the final hour of the session. At the end of the day, the Dow Jones Industrial Average was down 106 points; the broader S&P 500 Index was lower by two points; while the NASDAQ was up nominally. Market breadth showed a somewhat divided session, with advancers slightly ahead of decliners on the NYSE. From a sector perspective, the healthcare and utility issues forged ahead, while the industrial and technology names moved lower.
Traders received a mixed batch of economic news this morning. Specifically, the S&P Case-Shiller Home Price Index increased 5.3% during the month of November, showing a respectable improvement. However, the Chicago PMI came in at 50.3 in January, falling somewhat short of the consensus view. Meanwhile, the Conference Board’s Consumer Confidence Index delivered a reading of 111.8 in January, which was a constructive showing, albeit a bit lower than in December. Finally, the FOMC started its two-day meeting today, which concludes tomorrow with an interest rate decision and some prepared remarks at 2:00 PM (EST). After choosing to lift rates in December, most on Wall Street think the Federal Reserve will leave rates unchanged, for now.
Elsewhere, the fourth-quarter corporate earnings season continues. On point, today we heard from a few members of the Dow Jones Industrial Average. Specifically, shares of Exxon Mobil (XOM – Free Exxon Stock Report) slipped, after that company released its results. However, shares of Pfizer (PFE – Free Pfizer Stock Report) moved up in response to an upbeat report. Apple (AAPL – Free Apple Stock Report) was set to post its numbers after the market closed today.
Technically, the market has been a bit volatile lately, as traders digest recent earnings reports and look for a clearer agenda from Washington. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 11:30 AM EST
Following yesterday's late comeback, in which the Dow Jones Industrial Average managed to trim an early 223-point deficit almost in half, one might have thought that the bulls would have taken the initiative and pushed the market higher to start today's session. However, even after a nice run-up early in the day in Europe (stocks subsequently turned mixed on the Continent), our market got off on the wrong foot again, with the leading averages selling off for the second time in as many days. In fact, the losses, moderate at first, steepened as the morning rolled along.
All told, as we completed the first 90 minutes, or so, of the trading day, the Dow was off by some 150 points; the S&P 500 Index was weaker by 11 points; and the NASDAQ was down by 26 points. Losses also were sustained by the small- and mid-cap indexes, although the Dow's setback clearly led the way. Breaking the early market down, however, the aggregate tone was less bearish than the Dow, alone, would have suggested, as declining stocks led gaining issues on the NYSE by only a five-to-four ratio. Also, half of the 10 leading groups were up on the day at that point, with health care, telecom, and the utilities on the rise.
But the overall tone, albeit not decidedly bearish, was still negative, reflecting worries about the direction being taken by the Trump Administration, especially on trade and immigration. Also, earnings, while constructive in the main, have had pockets of weakness, with a notable one this morning being Under Armour (UAA), which reported a smaller-than-expected 12% gain in sales in the fourth quarter and a slight drop in earnings for that period. In response, though, there was nothing slight about the market's reaction, as that stock plummeted some 25% in the early going.
Elsewhere, besides the drama in Washington, and the ups and downs on the corporate profit front, the equity market also has had to digest the latest pivotal economic news. Specifically, this morning,the Conference Board reported that its Consumer Confidence Index, which had increased in December, surprisingly backtracked modestly in January, falling from 113.3 the month before to 111.8 in the now-concluding 31-day span. The Expectations Index also eased, while the Present Situations Index increased nicely in January.
It should be noted that the January retreat came after consumer confidence had hit a 15-year high in December, suggesting that sentiment remains quite strong, overall, a fact that should not be all that surprising given that home prices are rising; employment is strong; and the stock market is gaining, for the most part. All in all, then, this was not a disquieting report in the least, and suggests that there is enough overall momentum on display in the economy, for GDP growth to ascend 2% in the current three months.
Summing things up, then, as we head toward the noon hour in New York, the Dow is off by 140 points; the S&P 500 Index is down 10 points; and the NASDAQ is lower by 25 points. These back-to-back setbacks over the first day and a half of the new trading week still leaves the market in clearly bullish territory, even if a touch less frothy than had been the case just a few short trading days ago. Finally, the nervousness on display might also reflect the FOMC meeting now under way. However, the Federal Reserve seems almost certain to keep interest rates where they are; their rate decision will be out tomorrow afternoon. Stay tuned. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before the Bell
The first day of the new trading week and the penultimate session of January began on a bearish note. In fact, within the first 90 minutes of activity, the Dow Jones Industrial Average was off by more than 200 points, touching a session-worst setback of 223 points in that blue chip composite in a wave of selling that engulfed virtually all areas and sectors. The stock market then steadied, limiting its losses as the morning wore on, but still faced an uphill climb as we headed into the afternoon.
The market's sharp decline, its worst such pullback since early October, brought the Dow back below 20,000. Indeed, at the session's nadir, the index was some 30 points below 19,900 in a wave of selling that appeared to be due to a combination of profit taking (after the unrelenting run to record high ground), disappointment at the Administration's advocacy of restrictive trade policies, and this past weekend's selective restrictions on immigration.
As noted, however, some second thoughts did begin to creep in after lunch, and the worst selling abated, even as the stock market remained solidly lower. In all, the Dow, once off by the aforementioned 223 points at its trough, closed down about 100 points less than that at 19,971. At the same time, the S&P 500 Index shed 14 points. At its lows for the day, that index was down by 32 points; the NASDAQ lost 47 points, after earlier being off by more than 80 points; and the small-cap Russell 2000 was in the red by 18 points.
Breaking the latest session down, we see that each of the 10 separate equity groups comprising the S&P 500 grouping fell back in price, with the prime casualties being energy (on lower oil quotations) and basic materials after some recent strength. Also, losing stocks held a five-to-two advantage over winning issues on the Big Board. The ratio was an even more bearish three to one on the NASDAQ. This poor showing came after earlier market declines in Asia and across Europe. The weak performance also evolved ahead of the two-day Federal Reserve FOMC meeting due to start shortly.
As to that get together, expectations are that the lead bank, which raised interest rates at its last meeting in mid-December, will hold off on further increases at this time. Still, we would expect the Fed to hike borrowing costs two to three times this year--just not yet. The sense that the Fed will keep rates steady at this time is now so overwhelming, that we doubt whether the Fed entered into the market picture yesterday. Still, the selloff was so broad and powerful early on that there may be some concerns that the upward momentum may have been stopped for the time being.
Whatever the case, a new day is upon us, and as we look overseas for direction, we see that stocks were lower overnight in Asia on immigration jitters from the United States, but are higher in Europe, as GDP and inflation both increase. Also, oil is down in New York postings on increased supply concerns, while interest rates are little changed. As to our futures, the early read is lower, as a flurry of earnings reports are due to be released later this morning and after the stock market closes. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
