After The Close
Stocks opened lower this morning, and weakened further as the session progressed. Ultimately, the bulls and bargain hunters remained on the sidelines, making it difficult for the major averages to rebound. At the close of the session, the Dow Jones Industrial Average was down 602 points; the broader S&P 500 Index was off 55 points; and the technology-heavy NASDAQ was lower by 206 points (nearly a 3% drop). Market breadth showed broad based selling, as declining issues outpaced advancers by a roughly 2 to 1 margin on the NYSE. Most of the major equity market sectors declined, with steep losses in the technology names. Specifically, shares of Apple (AAPL – Free Apple Stock Report) slipped following investor concerns regarding its business outlook. In contrast, the defensive utilities managed to stage a slight advance.
Traders received no economic reports today and the lack of information probably did not help matters. Instead, investors seemed to worry about larger issues, such as a possible slowdown in the technology sector, ongoing international trade disputes with China, and inflationary pressures. Tomorrow will also be a light day for economic news. However, on Wednesday, we will get a look at the Consumer Price index (CPI) for the month of October, as well as the latest weekly crude oil inventory numbers.
In the corporate arena, it was a fairly light day for earnings reports. However, there was some M&A news worth mentioning. To wit, shares of Athenahealth (ATHN) moved higher on acquisition-related news.
The stock market pulled back notably during the month of October. November started out a bit better, with the market recovering some ground. While today’s retreat was notable, it remains to be seen if the selling will continue in the days ahead, or if the bulls will move in to support stocks.
- Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
1:00 PM EST
Worries about global trade disputes, especially with China; concerns regarding faltering demand from Apple Inc. (AAPL – Free Apple Stock Report); and a sense of malaise and worry following last week's FOMC meeting are combining to produce a wave of selling on Wall Street thus far today.
In all, as we reach the second half of the trading day, the Dow Jones Industrial Average is plunging, with a current loss of 430 points. The S&P 500 Index and the NASDAQ are off by 37 and 162 points, respectively. Losing issues hold roughly a two-to-one lead on gaining issues on the Big Board.
Breaking things down further, eight of the ten leading equity sectors are lower on the day, led down the losing path by technology, with nearly a 3% decline. Other major casualties include industrials, consumer cyclical stocks, and health care issues. There are simply few places for the bulls to hide so far today.
- Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in AAPL.
Before The Bell
The bulls made it two straight winning weeks on Wall Street, which was no small feat given the difficult performance for equities in October. Recall that volatility spiked last month, as a number of issues, both domestically and abroad, cast a cloud of uncertainty over the market, and true to form stocks did not perform well in that environment. But over the most recent five-day stretch of trading some of the uncertainty dissipated with the results of the midterm elections and the conclusion of the Federal Reserve’s two-day monetary policy meeting. Both events seemed to match the investment community’s expectations.
The Dow Jones Industrial Average, the broader S&P 500 Index, and the NASDAQ Composite all finished last week in positive territory, even with Friday’s profit taking after a huge move to the upside last Wednesday. The gain for the NASDAQ, though, was pared significantly by a sharp selloff in the technology sector on Friday. The week did conclude on a weak note, with the Dow 30, the S&P 500 Index, and the tech-heavy NASDAQ falling by 202, 26, and 124 points, respectively. On Friday, the selling was broadbased, with both the small- and mid-cap stocks down sharply too. On a sector basis, nearly all of the 10 major equity groups finished well in the red, with the biggest laggards being the technology, industrial, and telecommunications stocks. The latter sector was hurt by a number of uninspiring quarterly reports from telecom companies on Friday. Declining issues led advancers by nearly three to one on the NASDAQ and more than two to one on the Big Board. Still, the selling on Friday was not enough to erase the work the bulls did earlier in the week. For the five-day stretch, the three aforementioned indexes were up 2.8%, 2.1%, and 0.7%, respectively. The selling on the final day of the week was prompted by producer (wholesale) pricing data that showed a pickup in inflation during October.
Still, save for the inflation data on Friday, the news was mostly supportive for equities last week. The big event was the midterm elections on Tuesday. The outcome of the voting was mostly what Wall Street was anticipating. The result was a split government with the Democrats winning control of the House of Representatives and the Republicans maintaining an edge in the Senate. The investment community typically likes a split government and not surprising the major equity averages climbed notably on Wednesday. Then on Thursday afternoon, the Federal Reserve concluded its two-day monetary policy meeting and issued its statement. The meeting produced no surprises, as rates were held steady and the Fed hinted that another 25-basis-point hike to the federal funds rate remains on the table for its December meeting. The lack of surprises helped the equity market perform well before the release of producer pricing data on Friday morning. That report seemed to embolden the bears a bit.
Meantime, the trade dispute between the United States and China remains on the minds of investors and may well continue to influence trading and possibly increase the volatility in the international equity markets. Last week, the market was helped a bit by some reports that China may reduce the number of tariffs it recently placed on U.S. goods. However, the situation remains very fluid and sentiment could change quickly.
Turning to the week at hand, the earnings news will start to wind down, but that is not before we get a number of reports from the retailing sector, led by Home Depot (HD – Free Home Depot Stock Report) tomorrow and Walmart Stores (WMT – Free Walmart Stock Report) on Thursday. That sector will be on the minds of investors over the next several weeks, with the all-important holiday shopping season less than two weeks from commencing with Black Friday on November 23rd. On the business beat, we will get reports on consumer prices, retail sales, and industrial production. There are no reports of significance issued today, as the government agencies and the bond markets are closed for Veterans Day.
With less than a half hour to go before the commencement of trading stateside, the equity futures are pointing to a soft opening for the U.S. stock market. Overseas, the trading has varied so far today. The main indexes in Asia finished higher overnight, while we are seeing some selling in the European stock markets. The bearish mood on the Continent appears to be fueled by worries about rising political risks in Britain and Italy. There are growing concerns that Britain’s government will not be able to secure a Brexit agreement that satisfies the European Union as well as members of the country’s ruling party. That development, according to a leading financial daily, has forced Prime Minister Theresa May to abandon plans for an emergency cabinet meeting to approve a deal. Not surprisingly, the U.S. dollar, which is viewed as a safe haven, surged to nearly 17-month highs against a basket of major currencies, as investors sought out the highly liquid greenback. The situation in Europe bears watching as it has the potential to lead to a spike in volatility over here too. 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.
