After The Close
Stocks opened nicely higher this morning, slipped into negative territory around midday, partially recovered in the afternoon, and closed on a mixed note. At the end of the session, the Dow Jones Industrial Average was down 53 points; the broader S&P 500 Index was off one point; and the technology-heavy NASDAQ was higher by 11 points. Market breadth was neutral today, with winners about even with losers on the NYSE. Leadership was found in the technology and consumer names, offsetting weakness in the industrials and financial issues.
In economic news, the Producer Price Index moved up 0.1% in the month of November, while the core figure rose 0.3% for the period. These readings were relatively tame and do not suggest that inflationary pressures are becoming a major problem, just yet. Tomorrow, we will get a look at the monthly Consumer Price Index. In addition the Energy Information Agency will release its weekly crude oil inventory report.
In the corporate arena, a few retailers delivered quarterly profit reports over the past 24 hours. Among the larger names in the sector, shares of Casey’s General Stores (CASY) moved up in price, after the grocery store operator posted a respectable report. After the market closes today, apparel retailer American Eagle Outfitters (AEO) weighs in with its numbers.
Technically, the stock market continues to trade in a volatile fashion, as investors juggle concerns on numerous fronts. Strained trade relations with China, the possibility of a slower economy in 2019, further interest-rate hikes from the Federal Reserve, political tensions at home, and Britain’s plans to exit the EU, seem to be among the more pressing issues.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Another day, another decline for the already reeling stock market--at least for much of the latest session. On point, after plummeting some 4% last week on mounting global trade fears and worries about an inverted yield curve, the stock market began the current five-day span with additional declines. In all, after some momentary and limited strength in the first few minutes of trading, stocks fell back once more. Specifically, after the first hour of trading, the Dow Jones Industrial Average had dropped by another 500 points, falling into correction territory.
All told, the Dow broke 24,000, while the S&P 500 Index also tumbled into a correction, falling to below that key composite's October lows. (A correction is defined as a peak-to-trough setback of 10%, or more). The NASDAQ, which outperformed from the outset, headed higher early, but likewise succumbed to the mid-morning selling. The unloading of stocks would continue in and through the morning, although the early session lows would not be violated, which would give technicians some sense of confidence.
Indeed, after the noon hour arrived, the buyers would step back into the fray, hesitantly at first, but with some increased confidence as the session moved along. The early setback, which was a continuation of last week's selling, reflected not only worries about trade (principally with China, as U.S. spokes persons continued to issue conflicting statements, while China expressed its ongoing disapproval of U.S. efforts) and the aforementioned inverted yield curve.
On this latter count, last week had seen the yield on the three-year Treasury note climb above that on the five-year government debt instrument. Such an inversion can signal that a recession is down the road. Then, yesterday, the yield spread between the two-year and the 10-year Treasury note narrowed, but did not invert. That differential need to be watched. In addition, the markets were rattled by the news that a Brexit vote, originally scheduled for today, was delayed by the British Parliament.
Meanwhile, after the morning's steep setback, the mid-session equity buying continued into the afternoon, with the NASDAQ initially going positive in the early afternoon. The S&P 500 Index and the Dow would follow suit as the day progressed, but with less assurance. The market is clearly oversold, and with the calendar now deep into December, we are not getting the support from earnings that had been the case in late October. So, the Street was having to go out and find new catalysts, and that has been difficult.
Then, after the Dow and the S&P went positive, there was some backtracking as the final hour began, with both indexes falling back into the red, albeit gingerly. It would seem that the market is now low enough to stoke some selective bargain hunting, but not yet at levels that would engender wholesale buying. Even with this ability to erase a 500-point Dow deficit, volatility remains so high that confidence in the ability to rally on a sustained basis now is low. So, stocks may continue to meander for a while.
Finally, as the session drew to a close, the stock market made one last push to end the day in the green and would finally succeed, securing incremental final gains for the Dow and the S&P 500 Index. The NASDAQ would end more definitively in the plus column, but in no instance was there a late rush to end with notable gains. Still, having erased the major losses was impressive enough. In all, the Dow would add 34 points; the S&P 500 would climb five points; and the NASDAQ would jump 51 points. Only the Russell 2000 would end modestly lower on the day.
Now, the bulls will see if they can made it back-to-back wins, as they try to end the year on a less-troubling note. As to the overseas markets, we see that shares were mixed in Asia overnight, while in Europe, the major bourses are thus far trading strongly higher this morning. In other markets, oil prices are gaining; Treasury note yields are rising after slight gains yesterday; and U.S. equity futures are suggesting a solidly higher opening when trading resumes later this morning.
- Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
