After The Close
The equity markets moved nicely higher this morning, but then pulled back around midday, and finished the session on a mixed-to-higher note. At the end of trading, the Dow Jones Industrial Average was ahead 165 points; the broader S&P 500 Index was up three points; but the NASDAQ was lower by eight points. Market breadth showed a somewhat divided session, with advancers roughly even with decliners on the NYSE. The major market sectors were mixed, as gains in the energy and basic materials issues were offset by weakness in the financials and healthcare names.
Investors received a few economic reports this morning. Specifically, initial jobless claims declined to 222,000 for the week of February 17th, which was better than the 230,000 that had been anticipated. In addition, the Conference Board’s Leading Indicators Index increased 1.0% during the month of January, which was also a constructive reading. Tomorrow will be a light day with no major economic reports scheduled.
Meanwhile, the fourth-quarter earnings season is still in progress. Today, shares of Chesapeake Energy (CHK) soared after the energy giant delivered a better-than-anticipated report. However, shares of Roku (ROKU) sank after the television services company’s outlook disappointed investors.
Technically, the stock market has been looking for direction. However, elevated equity valuations, a rising interest-rate climate, and the possibility of some inflation, may keep some traders on the sidelines.
– 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
The stock market, which backtracked modestly on Tuesday to start the holiday-shortened week, got out of the starting gate quickly yesterday, fashioning a gain north of 100 points in the Dow Jones Industrial Average in the first few minutes of trading. But it was not just the Dow that gained, as each of the 10 leading core sectors pressed higher, save for the consumer non-cyclical group, while advancing issues were overwhelming losing stocks on the NYSE. It was the start of what appeared, for much of the day, as if it would be a wire-to-wire win for the bulls, who are still attempting to recover from the major selloff earlier in the month.
The gains evolved as investors awaited the 2:00 PM (EST) release of the minutes from the last Federal Reserve FOMC meeting in late January. That get together resulted in no interest rate change. That is unlikely to be the case at the next gathering on March 20th and 21st, where another quarter of a percentage increase in the federal funds rate is almost certain. As to the minutes, the Fed did acknowledge that there has been a creep up in inflation, a reality underscored by the most recent issuances on producer and consumer prices. Meantime, the economy is continuing to do well, albeit with some areas of softness.
Indeed, one of these softer spots is the housing market. To be sure, sales remain at nice recovery levels, but there are pockets of weakness. On point, data issued yesterday morning noted that sales of existing homes had eased by 3.2% in January, coming in at an adjusted annual rate of 5.38 million homes. That was below the December 2017 tally of 5.56 million residences. Still, prices rose once again, continuing a trend that has been in place for some years now. The price strength suggests that the sales softness was more apparent than real, and likely reflected a glaring absence of adequate housing supply.
Meanwhile, the market continued to roll, with the Dow's advance surpassing 150 points by late morning. In all, as we reached the noon hour in New York, the market was fairly near session highs to that point. However, stocks did soften for a time, with about half of the earlier gains being erased. But that pullback was comparatively brief, and soon enough, we were back to the races, as stocks again headed toward session highs as we neared the release of the Fed minutes. At 2:00, as the minutes were released, the Dow was ahead by just about 150 points.
Then, the minutes came out, and the Fed acknowledged, as expected, that it sees increased economic growth and an uptick in inflation, as justification for it to continue raising interest rates gradually. However, in spite of the rate hike forecast, the market initially liked the subdued tone of the statement, especially the emphasis on gradualism. Of course, it should be noted that the minutes were written before data showing an upward tilt in average hourly wages and a 0.5% jump in consumer prices in January, yet the tone was sufficiently benign to mollify the Street and stocks rallied further.
In all, the Dow soared to a gain of some 300 points within minutes, thereby erasing Tuesday's loss, while the NASDAQ advanced by close to 100 points just after the minutes were released. This strong advance, though, would continue only for a short time. Indeed, as we moved into the final hour serious selling got under way. Perhaps, it was the recognition that the minutes came before the wage and CPI issuances. More to the point, however, was the fact that the yield on the 10-year Treasury note climbed to yet one more four-year high of 2.94%.
So, all of the gain in the Dow, and then some, was erased as we moved more deeply into the final hour as those higher rates clearly rattled investors, who likely see the 10-year note soon climbing past 3.00%. Then, as we neared the close, the selling mushroomed to the point where the Dow ended matters with a stunning loss of 167 point. In all, it was a negative turnaround of more than 450 points in that composite. Lesser losses were suffered by most of the other indexes.
Looking at a new day, we see the indexes in Asia were trading in a somewhat mixed pattern overnight; meantime, in Europe, the weak close in our country was having an impact, as the bourses are trending lower in early morning trading. As to bonds, the early read on the 10-year Treasury note shows a yield of 2.93%. In our markets, the futures are signaling a softer opening when trading resumes, although the steep losses that were seen earlier in the morning are abating.
— Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
