After The Close
Stocks rose nicely to close the week on evidence of strength in the consumer and optimism on trade talks.
The major averages initially opened in mixed fashion, with the Dow Jones Industrials modestly higher but the NASDAQ somewhat lower on a downturn in profits at Amazon.com (AMZN).
Amazon is experiencing higher shipping costs in its effort to reduce delivery times to customers, causing third-quarter earnings to fall 26% from the year earlier. The Internet retailer indicated that fourth-quarter profits would likely fall short of analysts’ estimates, as well. The company is spending heavily on warehouses, personnel, and delivery vehicles.
Amazon did note that its Prime customers are shopping more as shipping times have decreased. But the prospect of major expenditures to boost business weighed on sentiment today. The strategy requires a leap of faith on the part of investors that it will pay off down the road.
Nevertheless, the NASDAQ joined the Dow and the S&P 500 in positive territory by around 10:00 A.M. EDT, as Amazon shares came off their lows. Bargain hunters buying the dip on Amazon likely figured the company has become successful by thinking long term, and this time might be no different.
Helping matters was a University of Michigan report showing that consumer sentiment is holding steady, despite some apparent slowing in the economy. Recent comments from major credit-card companies, such as Visa International (V – Free Visa Stock Report), affirmed the feeling that consumers are in relatively good shape.
Optimism about trade talks with China was another plus for stocks. The word out of Washington was that the U.S. and China were in accord on certain sections of an agreement.
Shortly after the noon hour, the Dow was up over 200 points. Sectors leading the charge in stocks included technology, basic materials, and energy.
Energy stocks got a boost as domestic oil prices climbed a bit, to around $56.65 a barrel. Government data released yesterday showed the first decline in crude inventories in six weeks, whereas the consensus view was for another build. There is also speculation that OPEC will consider deeper production cuts at its policy meeting in early December.
Stocks gave back some of their gains in the afternoon, but the Dow Industrials still rose 153 points on the day; the S&P added 12 points while flirting with an all-time high, and the NASDAQ climbed 57 points.
– Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Stocks opened the penultimate session of the week higher initially on some upbeat earnings presentations, most notably from Dow Jones Industrial Average component Microsoft (MSFT – Free Microsoft Stock Report) and from automaker Tesla (TSLA). Microsoft shares gained modestly on this news, while shares of Tesla soared almost 20% in early action on the surprise profit. The good Tesla news, in fact, energized the NASDAQ, which jumped out to an early advance of 60 points. However, as we passed the first hour of trading, the Street had taken on a mixed tone, with the NASDAQ still 20 points to the good, but the Dow had fallen back by more than 100 points.
The struggle for direction would then continue. As to earnings, a material boost was from Microsoft, with the software giant posting net of $1.38 a share, well above the consensus of $1.25. Sales also bested forecasts. Fellow Dow component Dow Inc. (DOW – Free Dow Stock Report) also bettered consensus results, and traded higher as well. A whole host of companies then reported after the close of trading yesterday, with the latest session seeing the busiest earnings day of the quarter. As to the rest of the morning, the Dow index would stay in the loss column, while the NASDAQ would advance solidly. The S&P 500, meantime, would straddle the fence.
The move into the afternoon brought few changes, with the blue chips continuing to show modest weakness, while the NASDAQ prospered. As to other news, the federal government reported a pair of key economic reports. First, an hour before the start of the trading session, the Commerce Department weighed in with data showing that orders for durable goods had decreased by $2.8 billion during September or 1.1%. The decrease followed three consecutive monthly increases. Expectations had been for a more modest decline of 0.8% for the month.
Then, 30 minutes into the trading session, the Commerce Department reported that new home sales had come in at an annualized rate of 701,000 in September. That was less than the 710,000 number expected. It also was below the August tally of 706,000 homes. The series showed small declines in the Northeast, the South, and the West. Overall, though, there was little aggregate movement on either of these reports, as most expect the economy to continue slowing and look for the Federal Reserve, which will meet next Tuesday and Wednesday, to reduce interest rates at that time.
The market then would spend the remainder of the session marking time, with the Dow finally concluding action entrenched in the loss column by 28 points. The S&P 500 Index, which never veered all that much from the breakeven line, would finish ahead by six points and the NASDAQ would climb by a strong 66 points. The NASDAQ and especially the S&P 500 Index would move closer to record highs in the process. Also of note, Treasury yields would edge higher on the day and the VIX volatility index would edge downward during what was a mixed to higher session, overall.
Then, after the close of trading, giant chipmaker and Dow component Intel (INTC – Free Intel Stock Report) weighed in with its quarterly results and that stock pleased the bulls, with its strong showing helping lift the stock in the after hours. As to the markets, the indexes in Asia were mixed overnight, while on the Continent, the leading European bourses are heading lower. In other doings, Treasury yields are up and oil prices are slightly weaker. As has been the case for the past week, quarterly earnings will be the prime driver again today. Next week, though, profits will need to share the limelight with the upcoming Federal Reserve meeting.
Finally, the early read on today's stock market was for an uncertain opening, but futures now seem to pointing to modest gains.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
