After the Close
Stocks finished a record-setting week mixed, with modest gains on the major averages contrasted by more declining than rising issues on the Big Board, although more stocks rose than fell on the NASDAQ. After being down all day, the Dow Jones Industrial Average turned slightly positive right at the close, up four points; the S&P was also higher by about four points; and the NASDAQ rose 24 points. The Dow was held back by a selloff in UnitedHealth Group (UNH - Free UnitedHealth Group Stock Report), which was beset by legal woes.
With earnings season largely in the books, investors may be waiting to see exactly how the proposed revisions to the tax code by the Trump Administration will shake out. Sentiment today may also have been held back by traders not wishing to take positions ahead of the upcoming long holiday weekend.
Among the stock market’s major sectors, the action was clearly in consumer non-cyclical names following a $143 billion bid by Kraft Heinz (KHC) to purchase Unilever (UL). Mergers in this space are fairly common, given the need to achieve growth against the backdrop of a sluggish revenue environment.
The interesting twist in this case is that Kraft Heinz is a food company and Unilever has a more varied lineup of food and household products. That suggests plenty of leeway for the disposition of brands, if terms can ultimately be agreed on.
On the down side, the energy sector continues to endure a pullback as evidence of increased domestic drilling mounts. Baker Hughes (BHI) reported further gains in its weekly survey of the U.S. rig count. That is on top of climbing domestic stockpiles of oil. While there are indications that international oil production is falling as OPEC and non-OPEC countries appear to be sticking to their agreement to pump less, it is tougher to get a handle on global inventories. Oil-related shares were weak again, all told.
It was a good week on the whole, with the Dow rising by about 350 points. We note that the financial markets are closed on Monday, February 20th in observance of Presidents Day. – Robert Mitkowski
At the time of this writing, the author did not have a position in any of the companies mentioned.
Mid-Day Update - 12:05 PM EST
Stocks are putting in a somewhat weak performance today. As we pass the noon hour in New York, the Dow Jones Industrial Average is down 63 points; the broader S&P 500 Index is off five points; and the NASDAQ, which has been rebounding, is now slightly higher. Market breadth suggests some underlying weakness to the session, as losers are well ahead of winners on the NYSE. Nearly all of the major equity groups are losing ground today, with notable declines in the energy and basic materials names. In contrast, the consumer noncyclical issues are making some progress.
Traders received few economic news items this morning. However, there was one notable report issued. Specifically, the Conference Board’s report of leading indicators rose 0.6% for the month of January, which was more or less in line with expectations.
Meanwhile, the fourth-quarter corporate reporting season continues. We recently heard from Deere & Co. (DE). That stock is off slightly, even though the equipment manufacturer delivered a respectable report, accompanied by an encouraging outlook. Further, shares of Consolidated Edison (ED) are drifting lower, after the New York-based utility provider delivered a respectable set of numbers. In M&A news, shares of Kraft Heinz (KHC) are up nicely on reports that the food giant may be looking to merge with Unilever (UL). Although the latter company quickly rejected Kraft Heinz Company’s bid, its shares are higher as investors think something may eventually be worked out between the packaged food giants.
Technically, the stock market has been holding up reasonably well lately. However, it remains to be seen if the bulls can remain in control, once the fourth-quarter earnings season taper off. – 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
Wall Street sought to make it four winning sessions in a row yesterday, only to come up on the short end of things, as the energy stocks, the banks, and the health care issues, among others, faltered for much of the day. True, the market's retreat was orderly, following the sizable wins earlier in the week, even though the averages are now overbought and there was a paucity of critical good news on the business front (save largely for another encouraging report on jobless claims). To wit, after stocks opened slightly to the plus side, the sellers came in and this kept the market in the minus column through the morning hours.
Things did not improve as the afternoon got under way, even though the shallow nature of the pullback suggested that the upturn could well have further to go after this brief pause. Before that further uptick is under way, however, we could have several more days of consolidation, or, at best, sideways action, as the catalysts for much higher equity quotations are not yet present. So, with earnings season winding down, with economic issuances lessening for the next week, or so, and with the President's much-awaited tax plan still a week or two away from its debut, this pause may not be over.
For now, however, after the three large-cap indexes had all secured record closing highs on Wednesday, along with the small-cap Russell 2000, the market seemed due for a rest. And it did so for much of the day. As to the economy, there continued to be some good news released, with jobless claims holding around their lowest levels in more than 40 years, while the Philadelphia Federal Reserve saw its manufacturing index hit its highest mark in over 30 years. Also in the realm of upbeat tidings yesterday, except for those seeking yield, was a rise in bond prices and a consequent decline in interest rates.
Breaking the equity market down as we moved toward the close, most of the 10 leading market sectors were lower, with just the recently ailing utility sector showing measurable strength. Also, losing issues on the Big Board retained a nine to five lead on gaining stocks; the differential favoring the bears was similar on the NASDAQ. This weak performance came on the heels of modest declines in Europe earlier in the day and no better than a mixed showing in Asia somewhat before that. Overall, it appears to be a day of rest for the weary, but unrelenting, bulls.
As the close arrived, there was a small attempt to right the ship, with the Dow turning positive, ending the session up eight points. Modest losses, however, persisted in the S&P 500 Index and the NASDAQ, while the small-cap Russell 2000 ended matters in the loss column by five points, or 0.4%, although that was less than half the mid-session deficit. Meantime, half the 10 leading groups fell on the day, with the biggest casualty being energy, which fell a full percent. The utility sector was the lone area of notable strength. All told, losing stocks held a four-to-three edge on gaining issues.
Looking ahead to the final day of this stronger week, we see that stocks mostly traded lower in Asia overnight, while they are losing ground so far in Europe this morning. Oil, too, is a bit weaker, but bond yields are retreating, as well. Looking to our shores, the early read on the U.S. equity is negative, with the stock market likely to open on the weaker side this morning. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
