After The Close
Equities opened lower today, briefly attempted to reverse course, weakened again in the afternoon, but managed to finish off the session lows. The decline in stocks today coincided with a batch of soft economic reports and ongoing concerns about trade relations with China. At the close of the session, the Dow Jones Industrial Average was down 104 points; the S&P 500 Index was off 10 points; and the NASDAQ was lower by 29 points. Clearly, sellers had the upper hand today, as declining issues easily outnumbered advancers on the NYSE. From a sector perspective, the energy, basic materials issues, and healthcare stocks were quite weak, while the high-yielding utility names showed some relative strength.
As noted, traders received a number of lackluster economic reports this morning. Foremost, durable goods orders advanced 1.2% during the month of December, which was a soft reading. Further, existing homes sales came in at 4.94 million units in January, where a better figure had been anticipated. Finally, the Conference Board’s Leading Indicators Index showed a 0.1% decline in January, where an increase had been expected. On a brighter note, initial jobless claims dipped to 216,000 for the latest reported week, which suggests that the nation’s employment situation is still in good shape.
Meanwhile, the fourth-quarter earnings season has not yet concluded, and some companies are still releasing their results. We recently heard from Domino’s Pizza (DPZ). Shares of that company declined sharply in response to a lackluster report. Shares of Copart (CPRT) moved up, however, after the auto dealership managed to satisfy Wall Street.
Technically, the stock market has staged a big advance since to start of the year. So, a momentary pause here is certainly not unreasonable.
- 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
Following the major fireworks last week and a ho-hum, largely directionless day on Tuesday, Wall Street began yesterday's session with slight losses. However, those deficits did not linger, and as we passed the half-hour mark of the trading day, the stock market had a mixed look to it. Once again, the main issue was the outlook for a trade deal with China. Optimism has increased on that count recently, although there has been little in the way of hard news to suggest that an accord is imminent. In fact, there seems to be a good chance that the early March deadline to secure a new pact will be extended.
The market then would start to firm up further as we moved more deeply into the morning, as the focus turned in some measure to the Federal Reserve as the central bank readied itself to release the FOMC minutes in the afternoon. (That issuance provided no big surprises, but there were some concerns elaborated.) In all, the Dow Jones Industrial Average, which would rally in the mid-morning to a gain of some 45 points, would hold onto a lesser increase as the morning wound down. Overall, it was the growing optimism on trade and the continuing expectation that the Fed would exercise patience on the interest-rate front that attracted the buyers.
Expectations on the trade front, meantime, are that some deal will evolve, but it could be a conditional one that satisfies no one fully, but also does not prove disruptive. The issues are complex, involving not only trade but intellectual property that may have no quick fix. Elsewhere, there was not all that much going on as economic news was sparse. Today will be a busier day with data due out a little later on sales of existing homes and the leading indicators. There also will be some earnings reports released.
Regarding the Fed minutes, the central bank suggested that the risks to the economy were largely to the downside. That suggestion roiled the markets momentarily. The minutes showed that members were concerned about the effects of a weaker outlook and greater uncertainties about foreign economies. That assessment briefly caused the stock market to weaken, with modest losses seen among the major indexes. But, as noted, that selloff, however mild, also was short-lived and stocks soon righted themselves.
The market would start to come back soon thereafter, with the Dow climbing to an advance just shy of 100 points. A similar pattern would be woven by the S&P 500 Index and the NASDAQ, although each index was somewhat weaker than the Dow. At the c lose, the Dow would retain much of its intraday advance, ending matters with a final gain of 63 points. Small advances were logged by the S&P 500 Index (five points) and the NASDAQ (two points). Also, advancing stocks held a modest lead on declining issues.
Now, we look out upon a new day and see that stocks were mixed in Asia overnight. In Europe, meantime, the principal bourses are trending in a somewhat sideways pattern thus far this morning. In other markets, oil prices are basically flat and yields on Treasury issues are grudgingly higher. Finally, U.S. equity futures are pointing to a mildly lower opening when trading resumes later this morning, despite optimism about a U.S.-China trade pact being effected.
– Harvey S. Katz, CFA
