After The Close
Today’s stock market trading was rather unsettling, as the indices primarily fell on weaker economic growth prospects abroad. Indeed, China’s economy showed another sign of weakening in its industrial production output, while the Eurozone PMI fell to its lowest level in four years. The Dow Jones industrial Average headed lower in the early part of the trading session, and made a series of lower highs and lower lows throughout the course of the day. The index was affected by weaker prices in a few of its component companies. On point, concerns about iPhones sales at Apple (AAPL - Free Apple Stock Report) increased, causing that stock to reach a seven-month low. Meantime, a report broke that Johnson & Johnson's (JNJ - Free Johnson & Johnson Stock Report) baby talcum powder had trace amounts of asbestos in it going back to the 1970’s. Though the company has vehemently denied those claims, the stock was down around 9% in early market action, as worries about future liabilities rose. The Dow ended the session near its lows, while the S&P 500 also followed that path. Overall, the Dow finished down 497 points, while the S&P 500 was down by 51.
Additionally, market breadth was wide, as decliners outpaced advancers by a 3.7-to-1.0 ratio. All sectors of the market were lower on the day, though interest rate-sensitive stocks, such as utilities and REITS, were among the best relative performers. Energy stocks, hurt by a fall in commodity prices, lagged the broader market, and the healthcare sector was dragged down by Johnson & Johnson’s performance.
In commodity news, crude oil prices fell on weaker-than-expected global demand expectations, linked to a worldwide slowdown. In addition, U.S. Treasury bond yields were off, thanks to a move toward safe-haven assets. Meantime, the VIX Volatility Index rose, as expectations for future price instability climbed.
Looking ahead, all eyes will be on the U.S. Federal Reserve Open Market Committee meeting next week. The Fed is expected to hike interest rates by 25 basis points at the December meeting, but this is not as much of a foregone conclusion as it once was, due to recent economic choppiness. Too, the market will be looking to see if the Fed changes its plans concerning interest rate hikes in 2019. On the earnings front, Dow components Walgreens Boots Alliance (WBA - Free Walgreens Stock Report) and NIKE (NKE - Free Nike Stock Report) are slated to report quarterly results later in the week.
- John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
Before The Bell
Following a session on Wednesday that saw the Dow Jones Industrial Average soar 458 points in the early afternoon, only to give back some 300 of those advancing points by the close, the stock market opened the day yesterday with strong increases once more. In all, the Dow quickly climbed by more than 100 points, as Wall Street digested the latest tidings out of China on possible trade accords between our country and that emerging behemoth. The NASDAQ also jumped at the open. Heretofore, uncertainty over the trade situation vis-à-vis China had led to a sharp increase in volatility and intermittent selloffs.
After that brief early spurt, the market headed still higher, albeit somewhat selectively, with the Dow climbing by better than 200 points. However, the S&P Mid-Cap 400 and the small-cap Russell 2000 eased back into negative territory as we concluded the first hour of trading. But the NASDAQ and the other large-cap composites continued to press higher. Also doing well in early trading was erstwhile Dow-30 component and struggling industrial concern, General Electric (GE). That stock benefited from an upgrade from a heretofore bearish analyst. Overall, though, it was the Dow that led the early charge on those less-ominous trade winds.
However, after the first hour, the bloom had started to come off of the rose a bit, and while the Dow managed to hang on to about 75 points of that earlier strong 200-point upsurge, the NASDAQ fell into the red, while the smaller indexes tacked onto their early losses. This steady erosion in the averages would carry over into the early afternoon, by which time the Dow would join the other major indexes in the red. Losses, meantime, would become more commonplace as the day wore on. Still, there were outliers, such as Dow stock Procter & Gamble (PG – Free Procter and Gamble Stock Report), which sported a two-point win as we moved into the final two hours of trading.
Looking at the day, to that point, there were about two losing stocks for every gaining issue, while most of the 10 leading equity sectors were lower. One of the few winning groups was energy, which benefited to a small degree from a near-3% surge in crude oil prices on signs of a tightening in supplies. Here, the tighter supply resulted from the fact that crude stockpiles were falling. Crude futures also drew support from indications, which were rather preliminary, that the trade war between the United States and Canada might be easing. We shall see.
Meanwhile, the choppy market action would continue into the final hour of trading with the Dow going back and forth into positive and negative territory. By that time, though, the blue-chip index would see more green than red. But the other composites remained in the loss column. That bifurcated trend would continue into the close by which time the Dow would muster a 70-point win, while the S&P 500 would make a late push to end matters off by less than a point. Losses, though, were tabulated by the NASDAQ, the S&P 400, and the Russell 2000, with the declines on the latter two rather significant.
Now, after yesterday's undistinguished session, we see that the major indexes were lower in Asia overnight on worries about weak economic data out of China; in Europe so far this morning, the principal bourses are moving downward as well on fears about easing global growth. Also, oil, a big gainer in the session yesterday, is a bit lower so far this morning, while Treasury note yields, up incrementally yesterday, are down a tad thus far today. Finally, the U.S. equity futures are posting early losses on those global growth concerns.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
