After the Close
Stocks opened slightly higher this morning, but after about an hour, they slipped into negative territory and largely stayed there. At the end of the session, the Dow Jones Industrial Average was lower by 14 points; the broader S&P 500 Index was down nominally, and the NASDAQ was off six points. There was a neutral tone to the market, as advancers slightly outpaced decliners on the NYSE. The major equity sectors were divided, too, with strength in the telecommunications names, as well as in the utility issues. Meanwhile, the financial and consumer cyclical stocks retreated.
In economic news, the employment situation returned to the spotlight today. Initial jobless claims came in at 265,000 for the week ended December 24th, which more or less matched expectations. Tomorrow will be a quiet day for economic reports, as the only major news item to be released will be the Chicago PMI.
In the corporate arena, few companies have been issuing quarterly results lately. However, with 2016 now drawing to a close, the fourth-quarter reporting season will soon be starting. We will hear from the larger companies first, including many major banks. Of note, the financial sector has picked up quite a bit lately, and should benefit from a higher interest-rate environment. It is worth mentioning that stocks are currently trading at elevated price-to-earnings multiples, so it will be important for companies to deliver upbeat guidance.
Technically, stocks are set to close out 2016 with a respectable showing. Wall Street has reacted favorably to the political changes set to take place in Washington at the start of the year. However, it remains to be seen if the new leadership will be able to live up to expectations. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:15 PM EDT
U.S. stocks entered Thursday looking poised to recoup some of yesterday’s widespread losses, but a mid-morning selloff returned most of the averages to the breakeven line or lower. Spurred by newly released economic data, the 11 A.M. (EDT) downturn also likely reflected a wave of profit taking as investors ready for a new year of trading. At the noon hour, the tech-heavy NASDAQ was showing the steepest drop, giving away roughly 17 points so far in the day’s trading.
The headlining story in recent weeks has been the Dow Jones’ march to 20,000. A post-election run up among industrial, financial, and basic materials stocks, coupled with a Santa Clause rally in December, saw the market briefly come within 20 points of that psychologically relevant figure. However, a bearish trend and investors closing their financial positions have prevented a definitive surge past the milestone from happening. Today’s revelation that jobless claims shrank at a lower-than-expected clip, and that the November trade deficit widened, only served to embolden these profit takers.
But, unlike prior days, the market has been a little more mixed so far today. The small- and mid-cap issues are faring better, helping to temper some of the selling exhibited in the large-cap groupings. The Russell 2000 Index has trended slightly higher this morning. Seven out of ten market sectors registered gains. Utility, basic materials, and telecom stocks have led the way. And, with investors perhaps looking to take advantage of the depressed valuations ahead of the new year, the healthcare sector was up solidly as we passed midday.
Meanwhile, oil appears to be settling at its recent levels. U.S. crude per-barrel has bounced around $54.00 for most of the past few days, as traders are waiting to see if OPEC can successfully implement drilling cuts globally. The cartel’s work has inspired some tentative hope that the market can be stabilized, but risks remain if certain members and outside nations fail to adhere to the agreement. A surprise increase in domestic inventory levels led to some selling in the energy sector, while U.S. crude was a shade under $54.00 at noon in New York.
So, with a day and a half of trading left in 2016, it seems that the post-election rally is facing some headwinds. The bulls appear to be on holiday, and the chances are fading that the Dow crosses the 20,000 threshold by yearend. A last-ditch awakening is entirely possible, especially in this market, but there may simply be too much ground to cover. Stay tuned. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
After several recent-session attempts by the bulls to mount an assault on the psychologically important 20,000 level on the Dow Jones Industrial Average, with no real success, although that composite did come within 20 points of that magic number at one point on Tuesday, these perennial optimists threw in the towel early yesterday. To wit, after some modest moves lower in the morning, the market, led down the losing path by the tech-laden NASDAQ, the S&P Mid-Cap 400, and the small-cap Russell 2000, saw some more serious selling evolve as the noon hour arrived on the East Coast.
Thus, after spending the early hours just slightly in the red, the leading averages fell more definitively in the early afternoon. In truth, however, the market's fundamentals had been weak throughout the early session stages, as the midday hours saw all 10 of the major equity groups already in the red as the basic materials sector finally gave up the fight. Also, declining issues were then holding a five-to-one lead on gaining stocks, while the Dow, one of the early session's better performers, had fallen to a 60-point loss. Larger percentage declines, meantime, were suffered by the Dow Transports and the S&P Mid-Cap 400.
So, as the afternoon began, and with no major economic issuances to sway thinking, it looked as though the day would see further losses, perhaps even a marked selloff. And, indeed, that is what started to transpire as we moved further through the lunch hour, as the declines in the small-and mid-cap reached and passed one percent, while the drop in the Dow, albeit notably less severe, was still material at almost 100 points. This move lower then persisted through the mid-afternoon with few signs of any let-up as the day wore on.
Part of the day's slide had to do with the psychological damage being done by the Dow's continuing inability to crack the 20,000 mark. That inability, it would seem, was beginning to wear on traders. In fact, many investors had been expecting a positive day, given the paucity of major economic stories (save for a 2.5% decline in pending home sales in November) and the further early ascent in oil. But a sharp drop of more than 1% in the Dow Jones Transports was causing some stir. It would appear as though some further ascent in oil might be needed to get the Dow over its target.
The losses then continued in uninterrupted fashion during the latter stages of the afternoon, as investors apparently remained reluctant to buy aggressively in the face of these high prices. The stock market also continued to look fatigued, as it has for days now. So, stocks wilted, with the losses moving modestly past 1% on the S&P Mid-Cap 400 and the Russell 2000. On a brighter note, at least for equity traders, is the fact that bonds rallied, with yields on the 10-year Treasury, which had crossed the 2.60% plateau just days ago, falling back to near 2.50%.
Even so, that modicum of good news could not stop the profit takers, and stocks continued to falter, with the Dow crossing the 100-point loss threshold on several occasions, as stocks showed no ability to stage even a mild comeback. The losses were less pronounced on the Dow, given some earlier strength in the financials. However, by late in the day, the individual losses in that composite were widespread, taking in the financial issues as well. In all, the Dow shed 111 points, closing near its low for the session and 167 points away from 20,000.
Elsewhere, the losses were even more substantial, easily surpassing 1% on the Russell 2000 and approaching that level on the NASDAQ. It seems that it will take a major effort to surpass that round number in 2016, and the latest actions suggests that such an outcome is becoming less and less likely. But early 2017 could be another matter. In the meantime, the new day is getting off to an inauspicious start overseas, where stocks are trending a bit lower in Asia and now Europe. As to our futures, the early read suggests a flattish open. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
