After The Close
The stock market started in the green today, as trader sentiment improved over the weekend, which caused the composites to move higher in the first few moments of trading. However, some negative news concerning Boeing’s (BA – Free Boeing Stock Report) 737 Max plane came out over the weekend and dragged both that stock and the Dow Jones Industrial Average lower. It led the Dow to fall into the red for a brief spell. Still, the rest of the market held up quite well and started to march higher through the early morning and continued through the afternoon. The composites closed not far off from the day’s highs. Overall, the Dow closed higher by 57 points, while the S&P 500 was up around 21 points.
Moreover, market breadth was quite positive, as advancers outpaced decliners by a 2.0-to-1.0 ratio. Energy stocks were among the best performers on the day, despite a move lower in the related commodities. However, materials equities were among the worst performers on the day.
In commodity news, oil prices were lower today, but much of the move down happened during the overnight session. Once trading began in the United States, the commodity trended upwards, recouping a substantial portion of the daily losses. Meantime, U.S. Treasury bond yields were higher today, as demand for the safe-haven assets declined a bit. Additionally, long-term rates rose more than short-term ones, which usually is positive for financials’ earnings. The VIX Volatility Index was lower, as demand for options protection fell a bit.
Looking ahead to tomorrow, a light amount of economic data will be released, which includes existing home sales for September. Additionally, earnings season will continue in earnest, as several large companies are slated to report quarterly results. These include Dow-components United Technologies (UTX – Free United Technologies Stock Report), Proctor & Gamble (PG – Free Proctor and Gamble Stock Report), and McDonald’s (MCD – Free McDonald's Stock Report). Overall, we think that earnings results and outlooks and any trade developments between the U.S. and China will move the markets tomorrow.
- John E. Seibert III
At the time of this article’s writing, the author held positions in some of the companies mentioned.
Before The Bell
The U.S. equity market fluctuated over the course of last week, with the unevenness driven by earnings news and some data on the economy. For the most part, news from the international trade front, which has had the biggest influence on trading this year, did not have much of an effect last week. Likewise, investors did not focus on monetary policy, with the Federal Reserve’s decision still more than a week away following the conclusion of its two-day FOMC meeting on Wednesday October 30th. Not much chatter is likely this week either, as the central bank leaders enter a quiet period ahead of the meeting.
As noted, the investment community was focused on the start of third-quarter earnings season, and the initial readings produced a mixed reaction. On the positive side were reports from JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) and UnitedHealth Group (UNH – Free UnitedHealth Group Stock Report), which got the reporting season off to a good start last Tuesday. However, later in the week, the news was not as supportive, with the market hurt by an uninspiring quarterly result from International Business Machines (IBM – Free International Business Machines Stock Report). The Dow 30 was also held back by some dour news from Boeing (BA – Free Boeing Stock Report). Specifically, reports surfaced that the aerospace giant delayed disclosing internal communications about its troubled 737 MAX jet, which was responsible for two tragic and deadly crashes, to the Federal Aviation Administration. All told, the earnings news, along with some disquieting data from the business beat, both domestically (a decline in retail sales and a pullback in housing starts in September) and globally (weak data from China), were behind some of the late-week selling on Wall Street.
On Friday, the Dow Jones Industrial Average, the NASDAQ Composite, and the S&P 500 Index fell 256, 67, and 12 points, respectively, which concluded a slightly bearish five-day stretch of trading on Wall Street. Among the 10 major equity groups, the economically sensitive sectors were not surprisingly, given the aforementioned news, the biggest laggards, while some of the more-defensive groups were in demand. There was some exodus out of riskier assets during the week’s final trading session.
Turning to the week at hand, the third-quarter earnings season is likely to be the focus of Wall Street, barring some unexpected developments on the international trade front. Indeed, investors are going to get a heavy dose of earnings news over the next five trading days, headlined by reports from 12 Dow-30 companies, including the aforementioned Boeing, as well as Microsoft (MSFT - Free Microsoft Stock Report), Visa (V - Free Visa Stock Report), and McDonald’s (MCD – Free McDonald’s Stock Report), among others. We also will get the latest quarterly results from social media giant Facebook (FB) and Amazon.com (AMZN). Conversely, it will be a rather light week on the business beat, but we will get data on both new and existing September home sales.
With less than a half hour to go before the commencement of the new trading week stateside, the equity futures are pointing to a modest rally on Wall Street after last week’s dour conclusion when the U.S. stock market opens for business. So far overseas, the mood has been good, with the main indexes in Asia finishing higher overnight and the major European bourses in positive territory as trading moves into the second half of the day on the Continent.
– William G. Ferguson
