After The Close
The stock market moved sharply higher this morning, and managed to extend its gains through the afternoon. Sentiment on Wall Street seems to be improving, with traders hoping that better trade relations with China will give corporate profits an extra boost. At the end of the day, the Dow Jones Industrial Average was ahead 444 points; the S&P 500 Index was up 30 points; and the NASDAQ was higher by 45 points. Market breadth showed widespread buying of equities today, with advancers leading decliners on the NYSE. Most of the major equity sectors moved higher. Specifically, the healthcare and financial names led the charge, while the utilities lagged.
In economic news, a few reports were issued this morning. Specifically, industrial production slipped 0.6% during the month of January, where a better showing had been expected. On a brighter note, the Empire State Manufacturing Survey showed business conditions improving in the greater New York region during the month of February. Furthermore, the University of Michigan’s Consumer Sentiment Survey registered a favorable preliminary reading for February.
Meanwhile, fourth-quarter earnings season is still in progress. Over the past 24 hours, we heard from a number of companies. Shares of Deere & Co. (DE) lost ground today, after the company posted a soft report, noting problems caused by international trade tensions. However, shares of PepsiCo (PEP) traded higher even as the company reported lackluster earnings, but announced a share repurchase program and some cost-reduction initiatives.
Technically, the stock market continues to advance, as we move through the month of February. The bulls seem to be setting the pace, but the bears who rotated out of the market at the end of 2018 may also be joining the party, at this point.
- 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
To be sure, retail sales were up 2.3% on a year-to-year basis. Still, the month-to-month retreat was noteworthy and suggested that there are some holes in the business outlook going forward this year. As for the report, in addition to the overall monthly decline, there were steep setbacks at furniture and home furnishing stores, at health and personal care outlets, as gasoline stations (as oil prices were weak), at sporting goods chains, and department stores. Sales also tumbled, by 3.9%, over the Internet. This surprise setback served to push stocks sharply lower at the opening bell.
On point, after the first few minutes of trading, the Dow Jones Industrial Average, on those weak retail spending numbers, had fallen by some 235 points. Notable losses also were tallied by the S&P 500 Index and the NASDAQ. Few sectors escaped the early selling wave. And that should not have been surprising, as this was the worst retail setback in a decade. The consumer staples and discretionary sectors especially lagged in the early going. Whether this was a one month outlier or the beginning of a sustainable trend is likely to be telling for the market going forward.
Meantime, after this initial steep drop, the market did try and recover, with the Dow paring its aforementioned deficit to fewer than 100 points. Continuing optimism about a trade deal with China was at least a partial offset to the sudden pessimism surrounding the consumer, as was some possible sense that this report does not set up a trend of any note. The other indexes rebounded along with the Dow. Thus, as we passed the first hour of trading, the market was still lower, but hardly setting up for a major selloff after the strong rally during the year's first six weeks, or so.
The afternoon would then roll along with the market near the neutral line, as stocks received support from the continued optimism on trade and further relief that the President appeared ready to sign the budget accord. But near the close came word that while he would sign the proposed legislation, he also seemed disposed to declare a controversial national emergency. That cooled down the ardor for stocks, causing the Dow to cede 104 points at the final bell and the S&P 500 Index to ease by seven points.
Now, after that choppy session, we see that stocks were lower in Asia overnight on U.S. economic growth fears, while in Europe the bourses are tracking higher in the early going this morning. Elsewhere, oil prices are up in early dealings and Treasury yields are just incrementally lower. This is all leading to an expected higher opening on Wall Street when trading resumes later this morning and the Street awaits additional critical economic data, including a report on consumer sentiment.
