After The Close
The stock market opened lower this morning, and was unable to meaningfully reverse course in the afternoon. Traders may have been worried that ongoing trade disputes between the U.S. and China could continue, and that an agreement may be delayed for some time. At the close of trading, the Dow Jones Industrial Average was down 396 points; the broader S&P 500 Index was off 46 points; and the technology-heavy NASDAQ was lower by 219 points. Market breadth was quite negative, with losers easily ahead of winners on the NYSE. Most equity groups lost ground today, with pronounced weakness in the technology stocks. In contrast, the high-yielding utility issues managed to advance, as worried traders looked for safe havens.
Traders received no major economic release today, and the lack of information did not likely help matters. Tomorrow, we will get a look at the housing starts and building permits for the month of October. Wednesday will be a very full day for reports, as there will be no news out on Thursday, due to the Thanksgiving holiday. Meanwhile, in the corporate arena, it was a quiet day, as well, with few corporate earnings reports released.
In general, stocks remain quite volatile. Of note, much of the progress made earlier in November has been erased, and the sentiment does not seem to be too bullish at this point. From a technical perspective, the S&P 500 Index is back below its 200-day moving average, located near the 2,760 level.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Midday Update - 1:00 PM EST
Back in the Rock and Roll era of the 1950s, the rhythm and blue singer Fats Domino had a hit song called “Blue Monday”. It had nothing to do with the stock market, but it might as well have, as the past two Mondays have been quite blue for those long equities.
On point, last Monday, the Dow Jones Industrial Average fell more than 600 points; today thus far, that same 30-stock composite is off by nearly 400 points, having at one point descended by close to 500 points. As was the case last week, it is the twin T's, trade and technology, that have rattled traders.
Specifically, after optimistic comments by the President that there might be basis for an accord with China on trade and tariffs had sent stocks up on Thursday and Friday, the Vice President said over the weekend that China must make concessions for a deal to happen. That nation has so far refused.
That apparent standoff and further worries about demand in the tech space have combined to again take the measure of the bulls as we wade into the early afternoon. The declines, meantime, are broad-based and sizable, with the tech group, as noted, leading the way lower.
— Harvey S. Katz, CFA
Before The Bell
After two-consecutive winning weeks on Wall Street, which included a nice rally at the start of November, the bears took back control of trading last week. Most of the damage was done early in the week, including a notable selloff last Monday, which saw the Dow Jones Industrial Average fall more than 600 points. Last week started with three straight losing days for the U.S. equity market before the bargain hunters returned over the final two trading days to pare the weekly losses. For the week, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index finished 2.2%, 2.1%, and 1.6% lower, respectively.
There are many variables in play for Wall Street right now, and we think some of the uncertainty arising has played a big hand in the spike in volatility this fall. Last week, the market was unnerved by a few events, most notably the signs that amicable Brexit deal stills appears far off. That has brought a good deal of uncertainty for the United Kingdom and the European Union. There were also continued worries about the health of Italy’s financial system; the ongoing global trade disputes and the effect it will have on the global economy; rising U.S. bond yields, and the impact such has on emerging market yields; and the recent slowing pace of GDP growth in China. The concerns about China’s economy, and the impact it will have on oil consumption has pushed crude oil prices into bear market territory, which is defined of a retreat of more than 20% from its most recent high. Not surprisingly, against this backdrop, it is easy to see why there has been a spike in equity market volatility. The CBOE Volatility Index (or VIX) rose more than 3% last week.
On Friday, the bulls held a slight advantage, though, with advancing issues leading decliners by a slim margin on both the New York Stock Exchange and the NASDAQ, more so the latter exchange. The NASDAQ was hurt by disappointing showings from the consumer discretionary and technology groups. Some weak quarterly reports from the retailers and a few semiconductor companies weighed on their respective sectors. Those two categories were the only laggards among the 10 major equity groups. The retailing struggles are not a great sign with the all-important holiday shopping season set to commence this week with Black Friday. Overall, the market got a midday boost from comments from President Trump that he would like to see a trade deal with China worked out. The general consensus among Wall Street pundits is that if China’s economy continues to slow it could have a wide-ranging effect on many of the world’s largest economies and ultimately their equity markets.
Looking at the week at hand that will be abbreviated with Thanksgiving on Thursday. The market will be opened on Friday, but volume is expected to be light as many traders make it a long holiday weekend. Thus, the news from the business beat will be packed into the next three days. Of note, we will get data on housing starts, existing home sales, and durable goods orders. The housing market and related homebuilding data will be highly scrutinized, as these sectors, which are important cogs in the nation’s economic output, have shown signs of fatigue in recent months. Speaking of the economy, the investment community got differing outlooks for 2019 from two prominent bankers last week. JPMorgan Chase (JPM – Free JPMorgan Stock Report) leader Jamie Dimon was optimistic about the U.S. economy next year, while Dallas Federal Reserve President Robert Kaplan struck a bit more cautious tone. Meanwhile, the earnings front will be rather quiet this week, with all of the Dow-30 companies now having reported third-quarter results.
With less than a half hour to go before the commencement of the new trading week stateside, the equity futures are indicating a modestly lower opening for the U.S. stock market. So far overseas, the trading was been positive, with the main indexes in Asia finishing higher overnight, while the major European bourses are in the black as trading moves into the second half of the session on the Continent. 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.
