After The Close
The stock market moved sharply lower this morning, but managed to recover some ground in the afternoon, albeit in a very choppy fashion. At the close of trading, the Dow Jones Industrial Average was down 296 points; the broader S&P 500 Index was off 47 points; and the technology heavy NASDAQ was lower by 151 points. Market breadth was clearly negative, with losers outnumbering winners on the NYSE by a wide margin. From a sector perspective, the technology and consumer issues lost considerable ground today, while the basic materials group managed to display some relative strength.
In economic news, according to the advanced reading, the nation’s economy, in terms of GDP, expanded at an annualized rate of 3.5%, during the third quarter. This showing was a bit better than had been anticipated, and suggests that the broader economy remains in good shape. Elsewhere, the University of Michigan’s consumer sentiment survey settled at a reading of 98.6 for the month of October, which was a solid number. Next week will bring numerous economic news items, including the October employment report on Friday morning. Given concerns about rising interest rates, traders will be paying close attention to these issuances.
In the corporate arena, the third-quarter earnings season continues to unfold. Over the past 24 hours, we heard from a number of large technology companies. Of note, shares of Amazon.com (AMZN) headed lower after the Internet retailer provided a softer-than-expected outlook. Further, shares of Alphabet(GOOG) also declined in response to a disappointing release. On a brighter note, Intel (INTC – Free Intel Stock Report) delivered an upbeat report, sending the stock higher.
Technically, the stock market has sold off sharply over the past couple of weeks. Unfortunately, the third-quarter earnings season, which has brought quite a few respectable reports, has not inspired the bulls, in contrast to previous quarters. Given the market’s somewhat elevated valuations, and mounting problems overseas, the current pullback may be constructive. Hopefully, the market will find some support near the current levels, and that a deeper correction is not looming.
- Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
10:45 AM EDT
The U.S. stock market has certainly been on a roller coaster ride. And the volatility is, if anything, increasing. For example, mounting woes overseas, headlined by economic turmoil in Italy and ongoing trade disputes with China, along with worries about politics and interest rates at home helped bring about a more than 600-point plunge in the Dow Jones Industrial Average on Wednesday. Then, a series of upbeat quarterly earnings reports from some of the nation's largest companies helped the market to regain its footing yesterday, with that blue-chip composite soaring by 400 points.
But what Wall Street gives, it often takes away. So, after the closing bell yesterday, some disquieting quarterly issuances in the technology sector caused an after-market selloff in the equity futures. That downturn has carried over to this morning. Indeed, as we pass the first hour of trading, the Dow is off by 375 points; the S&P 500 Index is down 58 points (entering correction territory in the process); and the tech-heavy NASDAQ is lower by nearly 200 points, or close to 3%. In fact, not even good news on the economic front issued earlier in the morning has calmed the bulls.
On this last count, at 8:30 AM EDT, the Bureau of Economic Analysis reported that third-quarter GDP (gross domestic product) had increased 3.5%, buoyed by a 4.0% jump in consumer spending. Although the 3.5% tally was less than the 4.2% surge in the second quarter, it was slightly better than the 3.3% gain generally forecast for the latest period. Restraining GDP growth somewhat were weakness in exports and residential building. Our sense is that this moderation in GDP improvement will continue in the current quarter with growth likely being on the order of 3%. Some further deceleration is probable in 2019.
- 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
This impressive showing, which followed gains in Europe earlier in the day, came as several giant corporations reported solid profits for the latest quarter. One such was tech behemoth and Dow component Microsoft (MSFT – Free Microsoft Stock Report), which posted results that were higher than forecast. That stock was up better-than-six percent in mid-morning activity. Also, Boeing (BA – Free Boeing Stock Report) shares rallied anew, one day after the company had provided a glimmer of hope for the market with its stellar earnings performance. To this point, the earnings results have been largely supportive for Wall Street, but often not enough to keep the bears on hold.
The inability of stocks to undertake a sustainable rally as yet reflects the widespread problems and uncertainty still abounding on both Wall Street and Main Street. These include, but are not limited to, the escalating problems between Italy and the European Union over budget spending, the international standoff between Saudi Arabia and Turkey, the eroding trade relations between the United States and China, and assorted problems closer to home, including recent weakness in the housing market, an earlier source of economic resilience. Finally, there have been a few notable profit misses among the generally strong performers.
Notwithstanding all this, the equity market continued to rally though the morning, with the Dow up by some 300 points after the first 90 minutes of trading. At the time, eight of the 10 leading equity sectors were higher, while gaining stocks held a three-to-one lead over declining issues on the Big Board. As before, the NASDAQ, on a strong gain in technology, was leading the way. The news would get even better as we moved into the early and mid-afternoon, with the Dow surging to a gain north of 500 points as we hit the final hour of trading. It was an all-inclusive win for the bulls.
Stocks would continue to hold healthy gains on the day as the session wound down and we awaited a slew of giant corporations to tally their quarterly metrics. As to the scope of the afternoon comeback, it was broad encompassing most groups and individual issues. AS noted, the advanced strengthened further as we moved into the first part of the final hour, with the Dow's gain cresting just above 520 points. Thereafter, some late selling ensued, which clipped about a third of the blue chip index's uptick in a few minutes before some final buying lifted the day's Dow gain to 400 points. The big winner continued to be the NASDAQ.
In all, the NASDAQ jumped by nearly 3%,easily surpassing the respective gains of 1.63% and 1.86% for the Dow and the S&P 500. It was a big win for the bulls, aided mostly by strong earnings in the tech sector and the absence of new global headwinds. Then, after the close, chipmaker Intel (INTC – Free Intel Stock Report), a big gainer in regular hours trading, weighed in with its quarterly results, and the bulls liked the upbeat tally, with the stock gaining nicely in after-hours trading on the sizable profit beat. The day ahead will now feature additional profit reports from some large corporations.
As to the new day, the equity markets in Asia, despite seeing the big win in New York, responded poorly, falling modestly overnight. In Europe, meantime, the key bourses are tracking notably lower at this time on global growth concerns. Also, oil prices are down on excess supply worries and Treasury note yields, up grudgingly yesterday, are now showing early sharp losses in a flight to quality. Finally, the U.S. equity futures are indicating an early steep drop on after-the-bell revenue and profit worries in the tech sector. Stay tuned.
