After The Close
The stock market started off the new trading week with an uninspiring performance. At the close of the session, the major averages were all in negative territory. The Dow Jones Industrial Average was down roughly 55 points; the broader S&P 500 Index was off 10 points; and the NASDAQ was lower by 42 points. Market breadth was negative, as decliners easily outpaced advancers on the NYSE. From a sector viewpoint, the energy and telecommunications names were areas of weakness today. The high-yielding utilities, which tend to be defensive holdings, displayed a degree of relative strength.
There were no notable economic reports issued this morning. The lack of news may have contributed to the session’s lackluster tone. Tomorrow will be a light day for reports, as well. However, the pace should pick up later this week. Specifically, on Wednesday we will get a look at the new home sales figures for the month of September. Durable goods orders for September are also due to be released.
Meanwhile, the third-quarter earnings season continues to unfold. Today, a number of widely-held corporations posted their numbers. Specifically, shares of Kimberly-Clark (KMB) traded modestly lower. The consumer products giant provided respectable results, but investors may have some concerns about the top line. In the energy sector, shares of Halliburton (HAL) also retreated, after the oil and gas services provider delivered results that met expectations, but issued cautious guidance.
Technically, the stock market took a pause today, which is understandable given the solid advances that have been achieved lately. Looking ahead, traders will be carefully following the third-quarter earnings season, while looking for assurances that the Trump Administration’s tax reform efforts are progressing, as planned.
— 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 - 11:55 AM EDT
With the major equity averages coming into the week at or near record highs, they were certainly vulnerable to some modest profit taking, especially on a day where there was not much news on the economy or earnings fronts. And that appears to be what we are getting on Wall Street today ahead of a slew of earnings reports tomorrow morning, including the latest results from four Dow-30 components.
Thus, as we move toward the midday hour on the East Coast, the mood of traders following a positive start to the day, has soured a bit. The Dow Jones Industrials are holding a modest gain, but the NASDAQ and the S&P 500 Index are in the red and we are seeing some selling in the broader small- and mid-cap sectors. Overall, declining issues are leading advancers on both the New York Stock Exchange and the NASDAQ, and most of the 10 major equity groups are sporting down arrows.
Initially, the market moved higher on the strength of earnings last week, news that the Senate had passed a budget plan Thursday night that may pave the way for some tax reforms, and news that Japan’s Prime Minister Shinzo Abe had been reelected over the weekend. The latter event will likely ensure that Japan continues its accommodative monetary and fiscal policies. However, after the initial move higher, trading has weakened stateside in the last hour. Still, none of the major equity indexes are too far removed from the neutral line, as investors take a bit of a pause before the influx of earnings news this week, which includes reports from over 160 S&P 500 companies and 12 Dow-30 components.
What earnings news we did get today was again mostly on the positive side. Two stocks that jumped after the release of their latest quarterly results this morning were PetMed Express (PETS) and Seagate Technology (STX). The former is up nearly 20% after beating revenue and earnings forecasts by a wide margin in the latest quarter. Likewise, shares of Seagate Technology are up sharply after the disk manufacturer topped the Wall Street consensus. Conversely, shares of toymakers Hasbro (HAS) and Mattel (MAT) are falling after the former warned of a cautious holiday shopping season this year. The company said that the Toys ‘R’ Us bankruptcy will soften sales during the key holiday period, as it is unsure how frequently it will ship items to the toy retailer.
Looking ahead to the second half of the trading session, the bears are holding a slight advantage, but we would not be overly surprised if the bulls were heard from at some point. Still, as noted above, we don’t expect the major averages to stray too far from the neutral line ahead of what will be four heavy days of news from Corporate America. Speaking of the corporate world, we did get some M&A news this morning, as report surfaced that Cisco Systems (CSCO – Free Cisco Systems Stock Report) is buying BroadSoft (BSFT), a Maryland company that delivers unified communications via service providers, for $1.9 billion. Stay tuned.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The final full trading week of October—a month that at times has historically proven very difficult for those long equities—is set to begin with the major U.S. equity indexes at record highs. The third-quarter earnings season, which heated up last week with nine Dow-30 companies reporting their latest quarterly results, has thus far been supportive for equities. However, on Friday, the earnings reports took a backseat to news late Thursday night that the Senate passed a new budget that many pundits believe will clear the path for tax reforms by the end of this year, an event that most think will be greeted warmly by both Corporate America and Wall Street.
Thus, on the final day of trading last week, the Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index added 166, 24, and 13 points, respectively. Overall, the buying was broadbased, with the small- and mid-cap sectors chipping in with nice advances of their own. Advancing issues led decliners on both the Big Board and the NASDAQ, and the majority of the top-10 equity groups finished the sessions comfortably in positive territory. There also was a whopping margin between issues hitting 52-week highs than lows, which we think is a good sign that this historic bull run may have some more sustaining power into the final stretch of 2017.
From a sector perspective, the leadership came from industrial, technology, and financial groups. In general, the more economically sensitive areas performed the best, aided by the aforementioned hopes of some tax reforms being implemented by the year’s end and some selective positive earnings news. Conversely, there was some modest selling in the consumer staples and energy sectors, with earnings reports likely factoring there. In particular, shares of Procter & Gamble (PG – Free P&G Stock Report) finished lower in response to a soft top-line showing in its latest quarter, which brought down the consumer staples group.
Indeed, the third-quarter earnings season, which heated up last week, kicks into high gear this week, led by reports from 12 Dow-30 components. On Friday, the earnings news proved productive, highlighted by reports from PayPal (PYPL) and General Electric (GE – Free GE Stock Report), with shares of the Dow-30 component recovering nicely into the closing bell after a shaky start. That lifted the Dow Jones Industrial in the second half of the session, as well. This week, the investment community will be looking at the Dow companies for some guidance, with the busy slate of earnings data culminating with reports from energy giants Exxon Mobil (XOM – Free Exxon Stock Report) and Chevron (CVX – Free Chevron Stock Report) on Friday.
Meantime, on the business beat, the investment community will be eyeing this Friday’s report from the Commerce Department on GDP. It will be the first reading on output for the third quarter, which will reflect the impact of hurricanes Harvey and Irma. Prior to the GDP release, investors will receive updates on durable goods orders new home sales, with both reports coming on Wednesday. Last week concluded with a good report on existing home sales for September. That data helped trading on Friday, as well.
With less than a half-hour to go before the commencement of the new trading week stateside, the equity futures presage some more buying in the U.S. stock market. Our sense is that whether the bulls keep the good times going this week will depend heavily on the earnings news and the happenings in Washington D.C. In general, if sentiment continues that some form of tax reform is likely by the time Congress breaks in late December, it may be cheerful upcoming holiday season for already jubilant equity market participants. Stay tuned.
— William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
