After The Close
After two brutal days of heavy selling, the market started off the final session of the week strongly to the upside. Although sentiment weakened as the morning wore on, stocks rallied in choppy afternoon trading, ending the day firmly in positive territory.
Economic news was on the light side today. The Bureau of Labor Statistics reported that prices for U.S. imports were up 0.5% in September, following declines of 0.4% in August and 0.1% in July. Most of this was driven by a 3.8% increase in the price index for import fuels. Meanwhile, earnings season got under way in earnest, with key banks Citigroup (C), JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) and Wells Fargo (WFC) all reporting this morning. However, investor reaction to the reports was mixed. Meanwhile, shares of former long-time Dow component General Electric (GE) resumed its slide, following the company’s announcement that it was delaying its third-quarter earnings release by five days so that its new CEO could complete his initial review.
At the closing bell, the 30-stock Dow Jones Industrial Average was up by 287 points, or 1.2%, while the broader S&P 500 was ahead by 38 (1.4%). The NASDAQ fared the best of the lot, tacking on 167 points, or 2.3%. However, the day’s gains were not enough to offset losses from the prior two sessions, as the indexes were still down about four percent for the week.
Performance among the 10 major market sectors was all positive. Technology shares led the day, gaining 3.2%, while consumer cyclicals also put in a solid showing, rising 2.0% and healthcare issues gained 1.5%. Light sweet crude also regained some lost ground, with the U.S. oil benchmark rising a full percent, to around $71.70 a barrel. However, the commodity was down about 3.5% for the week.
Trading on the European bourses didn’t fare quite as well. A strong start gave way to afternoon selling, dragging the UK’s FTSE 100, Germany’s DAX, and France’s CAC 40 to slightly below breakeven.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
That interest rate increase, to a yield of 3.2% on the T-note, stemmed from last Friday's report showing a jump in average hourly wages in the past year, the issuance of somewhat more hawkish monetary comments by Federal Reserve Chair Jerome Powell, and the aforementioned spike in the so-called core rate of the PPI. Meantime, optimism about a comeback in the market initially helped the leading averages to go positive after a few minutes of trading yesterday. However, that early optimism soon faded, even as interest rates stayed lower, so that as we hit the 90-minute mark of the trading day, the Dow was again off by 160 points.
Meanwhile, in addition to the tame CPI reading (the morning's report showed just a 0.1% rise in that index in September--or about half the gain forecast), the market was helped by an early rebound in technology. That uptick initially took in several high-profile tech names that had been pummeled the day before. However, once the overall rally faded, so did the comeback by the high-flying technology names. As to the interest rates, the Federal Reserve has hiked borrowing costs three times this year, with a fourth rate increase seemingly on the way by December.
The market would then spend the next several hours going back and forth between bouts of further and times of bargain hunting. As a result, the Dow would range from a session-worst decline (set in late morning of just over 370 points to an early afternoon comeback that nearly made up the day's losses. The performance of the NASDAQ was better, with that index going in and out of the profit column. Sector rotations also was present, with several of the prior session's major casualties seeing some modest buying, while a few of the stronger issues earlier suffering disproportionately.
As we entered the final two hours of trading, though, the bears looked to be retaining a modest edge, with the blue chip composite still off some 200 points. The selling, however, would pick up further in the next hour, so as we entered the final 60 minutes of trading, the Dow was off by more than 600 points for a brief few moments. At the time, with nearly all of the equity groups under water on the day and with losing issues holding nearly a three-to-one ratio; clearly, another rout appeared to be on. Things then would change only grudgingly for a while.
But as the final hour ticked down, a recovery would get under way, taking the Dow from a more than 600-point drop to a decline of just over 200 point. But that comeback could not be sustained, as sentiment remained bearish into the close. When all the dust had settled, the Dow, in a broad selling wave, ended off 546 points; the S&P 500 was lower by 57 points; and the NASDAQ was off by 93 points. Losing stocks, not surprisingly, overwhelmed winning issues on the Big Board. The selling has been so fast and furious the past two days that nearly all of the Dow's gain for the year has evaporated.
Now, following the past two difficult sessions, we look out on a new day and for direction look overseas to the major indexes in Asia, which rebounded somewhat in overnight trading. In Europe, meantime, the major bourses are tracking a modestly higher path, at this hour. In other news, oil prices are recovering some after their recent decline; Treasury note yields, which fell sharply yesterday in a flight to safety, are now heading higher in the early going; and the U.S. futures are posed for an early strong comeback. Once again, as was the case yesterday, we would expect the trading day to again be highly volatile. Stay tuned.
