After The Close
The stock market opened higher this morning, extended its gains into the early afternoon, but then turned sharply lower in the final hour of the session. Today’s reversal seemed to reflect mounting concerns about rising interest rates and higher bond yields, which can create a challenging climate for equities. At the close of trading, the Dow Jones Industrial Average was down about 167 points; the broader S&P 500 Index was off 15 points; and the technology-laden NASDAQ was lower by 16 points. Market breadth showed advancing issues about even with decliners on the NYSE. From a sector viewpoint, healthcare and industrial issues managed to move higher today, while noncyclical consumer stocks and utility issues weighed on the market.
Investors received a couple of economic news items this morning. Specifically, existing home sales dipped to 5.38 million units during the month of January, where analysts had been looking for a stronger figure. Further, the FOMC released the minutes from its January meeting. For the most part the issuance held few surprises for Wall Street. Tomorrow we will get a look at the latest weekly initial jobless claims.
Meanwhile, a few corporations posted profit reports today. Of note, shares of Public Storage (PSA) traded higher, after the REIT delivered a solid report. Elsewhere, shares of Devon Energy (DVN) sank, after the energy company put out a disappointing release.
Technically, over the past few sessions, the S&P 500 Index had managed to move up to its 50-day moving average, located near the 2,730 level. However, with the selling at the end of today’s session, the market now seems to be running into some resistance.
– 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
A one-two punch hit the equity market after the long President's Day weekend, and sent the Dow Jones Industrial Average tumbling at the outset of trading yesterday. On point, following the first few minutes of the latest session, that 30-stock composite was off by more than 200 points. As to those two items, the market's early setback was largely driven by a further rise in interest rates, with the yield on the 30-year Treasury note climbing past 2.91%, and by a marked selloff in shares of Dow component Walmart Inc. (WMT - Free Walmart Stock Report) on weaker-than-expected earnings, and especially weak e-commerce demand.
As to Walmart, that stock dropped more than 9% in morning dealings and was by far the biggest decliner on the Dow. However, one stock alone does not usually make a sustained market reversal. Thus, even as WMT shares continued to descend in price, the market, itself, began to rebound. In fact, as we passed from morning into early afternoon, the S&P 500 Index, the S&P Mid-Cap 400, and especially the NASDAQ, had all entered the plus column, and the Dow, once off more than 200 points, was now down by fewer than 50 points--with all of that deficit attributable to the losses in the big retailer.
Meanwhile, interest rate pressures persisted, with the 10-year note staying above 2.90%. All told, higher rates have kept Wall Street on edge for the past several weeks, although following the dramatic drop into correction territory by the major averages two weeks ago, the Street has made an eye-catching recovery the past fortnight. However, after that mid-session comeback, the bulls again faltered, with the key averages, save for the NASDAQ, falling back into the red, as the Dow's deficit swelled to 160 points. Then, after a brief respite, the deficits started to increase again, with the blue chip index's loss surpassing 200 points.
The worst of the selling again eased off briefly. Still, the other indexes, except for the NASDAQ, which saw its earlier 55-point gain cut by a third, remained in the loss column. The market would then weaken further as the afternoon progressed, with the Dow's deficit climbing to past 300 points, while the NASDAQ's earlier gain faded. To be sure, the setback continued to be led by Walmart, but that blue chip was not alone on the losing side. In all, nine of the top 10 groups were in the minus column as the day wound down, with the consumer non-cyclical group, which takes in the aforementioned Walmart, leading the way lower.
When all of the dust had settled, we saw the losses ease a bit again, but not dramatically so, in this somewhat volatile session. In all, at the close, the Dow was off by 255 points; and moderate deficits were sustained by the S&P 500 and S&P 400 Indexes, while the Russell 2000 was off a little more appreciably. The NASDAQ, meantime, after having been in plus territory throughout much of the session, finally ended lower by a handful of points on some offsetting strength in the tech group. As before, losing stocks and groups were in the majority.
Looking ahead to the latest session, the focus will again be on interest rates, specifically, the 10-year Treasury note, which ended trading yesterday with a yield of 2.89%. Also, today, we will get data on sales of existing homes for January, where a slight gain is forecast. Also, the Federal Reserve will release the minutes from its last FOMC meeting. That issuance will be closely watched when it comes out at 2:00 PM (EST). Also, tomorrow, we will get not only weekly jobless claims, but also the leading indicators, which are likely to show another formidable increase.
Finally, in news this morning, stocks in Asia were higher in overnight dealings, while in Europe, the major bourses are thus far working lower. Further, yields on the 10-year Treasury note are now at 2.89%, or virtually unchanged from late yesterday, while the U.S. equity futures are pointing to an early modest setback in the market.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
