After The Close
The stock market opened sharply lower this morning, managed to recover nearly all of the ground around noon, but still closed in negative territory. At the end of the session, the Dow Jones Industrial Average was down 92 points; the broader S&P 500 Index off just one point; and the technology-heavy NASDAQ was lower by three points. Meanwhile, market breadth was negative, as there were more decliners than advancers on the NYSE. Further, many of the major market sectors took a step back today, with significant losses in the energy and basic materials issues. In contrast, the interest-rate sensitive financials and some of the consumer names managed to make progress.
In economic news, housing starts declined 5.3% to 1.2 million units during the month of September. A slightly better reading had been anticipated. Building permits, largely viewed as a forward-looking indicator, softened just slightly during the period. Elsewhere, according to the EIA, crude oil inventories showed a greater-than-anticipated increase during the latest reported week, and that likely explains the weakness in the commodity markets today. Finally, this afternoon, the FOMC released the minutes from its latest meeting, suggesting further interest-rate hikes are likely by the end of the year. Tomorrow, the latest weekly initial jobless claims figures will be released, along with the Conference Board’s index of leading indicators.
In the corporate arena, we heard from a couple large names. Of note, shares of International Business Machines (IBM – Free IBM Stock Report) declined, as investors seemed discouraged with the company’s efforts to move the business forward. Meanwhile, the situation was better for Netflix (NFLX), as the media company’s stock moved up after a solid release. Tomorrow we will hear from many large names, including Phillip Morris (PM) and American Express (AXP – Free American Express Stock Report), after the closing bell.
Technically, the stock market rallied yesterday, as the bulls started to mobilize. However, it remains to be seen if they can mount an extended buying campaign, and get the market back on track.
- 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
It seems to again be all about earnings--at least for one morning and maybe longer. To wit, after a series of market declines caused by a sudden rise in interest rates, growing fears of inflation, and concerns about worsening trade disputes, the stock market righted itself yesterday morning, and did so in a big way, with the Dow Jones Industrial Average, off by nearly 1,400 points last Wednesday and Thursday driving out to a gain of nearly 300 points in the first half hour of trading. Behind this turnaround, following a modest drop in the leading averages on Monday, were strong earnings results from Dow component Goldman Sachs (GS – Free Goldman Sachs Stock Report).
Also contributing was a solid showing from competitor Morgan Stanley (MS). Expectations for earnings, meantime, are very high, with consensus forecasts calling for gains on the order of 19% for the recently concluded third quarter. Of course, sentiment is still fragile and it would not take much to put earnings onto the back burner. But, for the time being, at least, and in the absence of new crises, the focus is on the top and bottom lines of Corporate America. On other matters, one day after the Commerce Department reported just a 0.1% rise in September retail spending, that same agency reported a ho-hum report on industrial production.
Specifically, the report showed such output climbing 0.3% last month, or slightly less than forecast. Meanwhile, capacity utilization at the nation's factories was measured at the same 78.1% as in August. Such data, however, changed little on Wall Street where the key indexes, buoyed by solid corporate results, continued to soar, with the Dow's advance topping 350 points as we approached the noon hour in New York. It seemed that last week's unsettling news on interest rates were being emphasized less by investors, at this juncture. And as for rates, they edged down slight at midday, perhaps on the sluggish economic data.
The market's advance then strengthened into and through the lunch hour, as investors, cheered on following the succession of positive corporate issuances to date, chose to look optimistically on the upcoming earnings reports set for release in the coming days. As such, the market continued to press higher, with the small-cap indexes joining their large-cap counterparts in the plus column. To be sure, there were some outliers, such as WW Grainger (GWW), but for the most part, the movers were in the plus column, including Dow component UnitedHealth (UNH – Free UnitedHealth Group Stock Report).
The advance then hit the 500-point mark on the Dow as we entered the home stretch, with no suggestions of even a mild late-day pullback. As before, the common theme was strong earnings, and that overcame concerns about trade with China, domestic politics, and the evolving tensions with Saudi Arabia. The surge would cross the 500-point mark on the Dow (ending higher by 547 points), while the NASDAQ would soar by 215 points, a materially larger increase (nearly 3%) on a percentage basis than the Dow's rise. For one day, at least, there was no place for the bears to hide.
So, after yesterday's fireworks and monumental recovery for the equity market, where do the bulls go from here? For some hint of the upcoming day's action, we look overseas, where in Asia, the bulls were active in the overnight hours driving stocks nicely higher. In Europe, meantime, the major bourses were mixed in the early action. In other news, oil prices are heading slightly lower; yields on Treasury issues, which eased slightly yesterday, are edging higher ahead of the release of the Fed minutes; and U.S. equity futures are moving a tad lower in early trading this morning.
– Harvey S. Katz, CFA
