After The Close
The market started trading lower today, owing to reports of weaker-than-expected earnings from a few names, including Dow-30 componentHome Depot (HD – Free Home Depot Stock Report). In addition, housing starts were rather weak in December of 2018, which hurt broader economic sentiment. However, these factors were somewhat buoyed by flattish building permit application data, suggesting that any weakness may be short lived. The Dow Jones Industrial Average fell by as many as 125 points in the early portion of trading, and other indices were lower in tandem. However, a solid consumer confidence number was recorded for February, and the market rebounded rapidly, gaining back a good portion of the day’s losses. The trend higher continued, and gradually, the market turned positive. Though trading throughout the rest of session was a bit choppy, much of the final portion of the day occurred in a largely sideways fashion. In the final moments of trading, the markets sold off modestly. All told, the Dow closed lower by 34 points, the S&P 500 was down two points, and the NASDAQ slipped five points.
Additionally, market breadth was rather neutral, not especially favoring advancers or decliners. Technology stocks were among the best performers on the day, while materials equities were among the weakest.
In commodity news, oil prices were modestly higher, as demand expectations rose. In addition, U.S. Treasury Bond yields were a bit lower, suggesting a flight to safe-haven assets occurred. Also, the VIX Volatility Index was slightly lower, as demand for options protection fell.
Looking ahead, several economic reports are slated for release tomorrow. These include the Energy Information Administration’s status report on oil inventories, and factory orders for December are on the docket. Meantime, a few key retailers are slated to post quarterly results. These will likely show how the broader economy fared late last year into the early first quarter.
- John E. Seibert III
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 stormed out of the gate yesterday, buoyed by news that the President had agreed to extend the trade deadline date for enacting new tariffs on China beyond March 1st on rising expectations that a trade deal can be forged with that fast-growing economic powerhouse. Also boosting equities was an increase in merger activity, propelled by news that ailing industrial giant General Electric (GE) had agreed to the sale of its biopharmaceutical unit for $21.4 billion. GE shares initially rose some 15% on this news.
This one-two punch, which had earlier lifted China's market by more than 5%, helped propel U.S. stocks to an early advance of some 200 points in the Dow Jones Industrial Average. In fact, as we passed the 90-minute mark to the trading day that index was ahead by just over 200 points, with vigorous advances of 20 and 70 points tallied, respectively, by the S&P 500 Index and the NASDAQ. Major gains were boasted by a number of high-profile tech and industrial names, as the Street continued its early 2019 comeback.
To be sure, this merger story (GE) and other news on that front had a positive early impact on trading, but it was the news of the delay in posting new tariffs that really led the way higher. Among the leading groups, energy and financials led the way higher. Among individual names, Caterpillar (CAT – Free Caterpillar Stock Report) provided a nice lift. The President did not put on a new deadline for a trade accord, but the presumption is that so long as progress appears to be in place, the backdrop will be regarded in a less-contentious manner.
Meanwhile, the stock market continued to march higher, with the Dow holding on to a 200 point advance, by and large, throughout the morning trade. Prices then would moderate somewhat as the afternoon began, so that as we reached the 1:30 PM (EST) mark, the Dow's gain had eased to 110 points, or about 100 fewer points than at its morning best reading. The other indexes also had wilted somewhat, as investors apparently were focused on getting more tangible indications of lasting progress on trade.
The market's solid early advance then would fade notably into the late afternoon, with the Dow especially slowing its gains, so that as we entered the final hour of trading, the earlier 210-point surge had lost most of its pop, as the 30-stock Industrials were up by fewer than 100 points. The other indexes also saw their earlier strong gains get whittled away to a large degree, so that as the session ended, the Dow was up just a modest 60 points and the S&P 500 was ahead only three points.
Looking ahead to a new day now and to possibly further trade-related questions, we see that the major indexes were lower in Asia, while so far this morning, the European bourses are trending downward as concerns arise about the details of any deal with China. In other trading developments, oil prices are trending higher and Treasury note yields are edging a little lower. Finally in a signal about our markets, the early read on U.S. equity futures is for modest declines.
– Harvey S. Katz, CFA
