After The Close
Earlier today, market action across several indices started with sharply lower trading. Indeed, the Dow Jones Industrial Average lost more than 548.62 points (compared to the previous close), while the S&P 500 index was down by 64.45 points. In addition, the NASDAQ hit correction territory (down 10%) from the all-time high set in August. These moves began during overnight trading, echoing stock action in Asia and Europe. The selloff was exacerbated by a few underwhelming earnings reports across U.S. industrial companies. However, prices recovered strongly throughout the course of the day, gaining back most of the earlier losses, as concerns about foreign operations ebbed somewhat. Still, the S&P 500 and NASDAQ closed below their respective 200-day moving averages. In all, the market ended moderately lower.
The best performing sectors were interest-rate sensitive REITS and consumer staples, which benefited from a reduction in U.S. Treasury bond yields. Meantime, energy-related stocks were among the weakest performers, which was largely a function of lower crude oil prices. The decline in that commodity was likely due to an expected increase in inventories. Supply data will be issued tomorrow.
Meantime, some notable earnings reports occurred early in the day, including from five Dow companies. 3M Company (MMM – Free 3M Stock Report) recorded lackluster third-quarter earnings and uninspiring guidance, which caused the stock to fall as much as 9% in early trading before rebounding some. In addition, Caterpillar (CAT – Free Caterpillar Stock Report) slipped 10% in early market action, hitting a 52-week low on a disappointing outlook, as operations were hurt by tariffs and higher input costs. On the other hand, McDonald’s (MCD – Free McDonald’s Stock Report), Verizon Communications (VZ –Free Verizon Stock Report), and United Technologies (UTX – Free United Tech. Stock Report) stocks bucked the lower early market action thanks to better earnings.
Looking ahead to tomorrow, it will be a busy day for economic news, as new-home sales figures will be released, as will the EIA status report of crude oil inventories. In addition, several companies are slated to report earnings, including Dow components Boeing Co. (BA – Free Boeing Stock Report) before the market opens, and Microsoft (MSFT – Free Microsoft Stock Report) after the closing bell.
- John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies.
10:45 AM EDT
The stock market, which essentially teased to the downside yesterday, with a minor setback, is really hitting the skids this morning. On point, a succession of disappointing earnings reports, an intensification of the major global conflicts, continuing concerns about international trade, and uneasiness ahead of the midterm elections are combining to take the averages down sharply today.
In all, as we pass the one-hour mark of the trading day, the Dow Jones Industrial Average is down 525 points; the S&P 500 Index is lower by 62 points; and the tech heavy NASDAQ is in the red to the tune of 188 points. There simply are few places for the bulls to hide.
Importantly, the Dow has fallen below the psychologically important 25,000 mark, with its descent to below 14,800. The last selloff earlier this month stopped at 25,000. So, we could well head lower in the very near term.
- Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
In all, as the noon hour passed in New York, the Dow was still off by over 200 points on weakness in the financial stocks and some industrials, such as DowDuPont (DWDP – Free DowDuPont Stock Report). The S&P 500 Index, too, was lower, but not the NASDAQ, which was benefiting from strength in some high-profile tech names, including Apple Inc. (AAPL – Free Apple Stock Report). As we moved more deeply into the afternoon, sector rotation and some bargain hunting after the woeful start to the month of October would again cut into the day's Dow losses.
So, as we headed toward the final two trading hours, the Dow was off by just over 100 points, but the NASDAQ, benefiting from the aforementioned rally in technology, was ahead by some 40 points. Behind this volatility is uncertainty. To be sure, October often is a month that features wide swings and memorable selloffs, although the 31 days, overall, tend to be a fairly good stretch for Wall Street. This year, strong earnings, as more than 80% of the larger companies are exceeding estimates, are being offset by escalating global concerns.
There also are some jitters on the economic stage, with climbing mortgage rates cutting into the housing market, with the latest data showing a further decline in sales of existing homes. That latest drop followed a pullback in new housing starts for September. Then, there are rising interest rates, with the Federal Reserve seemingly on course to raise borrowing costs one more time this year, making it four such hikes for the 12 months. Our guess is that the next Fed increase will come in December.
The stock market then would try one more time to rally, but again with mixed success, as the Dow would be unable to venture back into the black, while the NASDAQ would generally add to its session gains. Meantime, the financials remained the big losers on the day, led down the unfortunate path by Bank of America (BAC). In all, eight of the top 10 equity sectors lost ground, with the Big Board showing a plurality of losing stocks over winning issues of some three-to-two. The negative gap on the NASDAQ was about four to three.
As noted, the equity market could not fully right itself as the final minutes ticked down. And at the close, the Dow, with some last-minute selling, ending lower by 127 points, while the tech-heavy NASDAQ would add 20 points. A 12-point drop would close things out for the S&P 500, while the small-cap Russell 2000, up for much of the session, would end off slightly. The bond market would show little change, with the yield on the 10-year Treasury note concluding the day's action at 3.20%, virtually unchanged.
Looking out at a new day now, we see that stocks were off sharply in Asia overnight, with shares in China, up sharply to start the new week, showing a loss of more than 2% in dealings overnight. Stocks in Europe, meantime, were deeply in the red, falling to their lowest levels since 2016 in early trading, while oil prices were off, as well; and Treasury yields were notably lower. Finally, U.S. equity futures were exhibiting early morning weakness on the heels of softer market trading overseas and increasing global tensions.
