After the Close
Equities put in a weak showing today. At the close of trading, the Dow Jones Industrial Average was down 25 points; the broader S&P 500 Index was off six points; and the NASDAQ was lower by 36 points. There was a negative tone to the session, as decliners easily outpaced advancers on the NYSE. Essentially, all of the equity sectors retreated, with sizable losses in the technology, basic materials, and consumer cyclical issues. In contrast, the utility stocks managed to advance nicely.
Traders received a mixed batch of economic news this morning. Specifically, the revised fourth-quarter reading showed the nation’s gross domestic product (GDP) expanding at 1.9%, annually. Many traders on Wall Street had been expecting a better showing. However, on a brighter note, business conditions held up quite well in the Chicago region in February, according the latest PMI report. Also, the Conference Board’s Consumer Confidence Index rose to 114.8 in the month of February, which was better than had been anticipated. Tomorrow will be a busy day for economic news, as well. We will get a look at the latest monthly construction spending figures, as well as the ISM Manufacturing Index. Further, the Federal Reserve’s Beige Book summation for the month of March will be released in the early afternoon.
Meanwhile, a number of large corporations delivered their financial results over the past 24 hours. Of note, we heard from The Priceline Group (PCLN). That stock rose after the online travel operator put out encouraging results. Meanwhile, shares of Target (TGT) tumbled, in response to a weaker-than-anticipated release and soft guidance.
Technically, stocks have been holding up relatively well. Of note, the fourth-quarter earnings season is now largely complete, and traders may be looking for the next catalyst that could move stocks higher. Many may be turning to the new Administration in Washington for direction, especially with the President to speak tonight before Congress. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 11:50 AM EST
A second straight strong month to this still relatively new year will conclude shortly on Wall Street. But the month, which saw gains of some five percent in the Dow Jones Industrial Average and roughly 4% in the S&P 500 Index and the NASDAQ, seems likely to go out on a modestly weaker note if this morning's listless action is reflective of the entire session. On point, after a nervous opening, with most traders' eyes focused clearly on this evening's address before Congress by President Trump, stocks have continued to trend lower, with notable weakness in the NASDAQ, the S&P Mid-Cap 400, and the Russell 2000.
As to other influences, there were two economic reports of note released this morning, and neither raised eyebrows. To wit, the Commerce Department reported revised fourth-quarter gross domestic product results that were not much of a revision, as GDP showed the same 1.9% advance as it had in the first estimate for that period released a month ago. Expectations had been for a slight upward revision to 2.1%. Our forecast calls for a modest increase in output--to just over 2%--in the current three months. Elsewhere, the Conference Board issued its Consumer Confidence survey for February, and results here topped expectations.
Specifically, the Consumer Confidence Survey hit 114.8 for this month. In January, that figure had stood at 111.6. Expectations had been for a survey result of 111.0. The confidence report is followed as a gauge of consumer attitudes toward business conditions, personal finances, and jobs. In all, confidence remains at a 15-year high. Moreover, according to the Conference Board, "consumers rated business conditions and labor market conditions more favorably this month than in January." Consumer also were more optimistic about the short-term outlook this month.
Still, even with the relatively satisfactory GDP issuance and the better consumer sentiment survey, the stock market has languished all morning, although some buying in the last few minutes has lifted the Dow to near the breakeven mark. However, the NASDAQ is still off by 18 points; and the S&P Mid-Cap 400 and the small-cap Russell 2000 are off by half a percentage point, or more. Breaking things down further, only the utility group among the 10 leading sectors is up so far on the day, while losing stocks are holding almost a three-to-lead on gaining issues.
So, heading into the afternoon, Wall Street is on the defensive, if just slightly so. Among the high-profile losing issues of note, shares of Wal-Mart Stores (WMT - Free Wal-Mart Stock Report) are off almost 2% so far today. A number of lesser names are off even more sharply in early dealings on what promises to be a nervous trading day to end a strong month for equities. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before the Bell
Following 11 straight advances for the Dow Jones Industrial Average, and a succession of all-time highs for that index in the process, the stock market began the penultimate session of February to the downside. As throughout much of this stretch of intermittent profit taking, however, the initial setback was mild and short lived. So, within an hour, or so, the selling had evaporated and the major indexes were all back on positive territory. The initial gains were quite small, but encouraging, nonetheless.
Behind the early and limited selloff in the major indexes was some obligatory profit taking after the aforementioned string of daily wins for Wall Street. As before, though, on those recent occasions when there has been some selling, the setbacks were brief and shallow. The subsequent comeback, which, as noted, was not impressive, represented optimism ahead of this evening's scheduled speech to Congress by President Trump. Wall Street is hoping he will entertain specifics regarding tax cutting and deregulation, two items that have propelled stocks higher.
As to other news, data issued during the morning showed a nice gain in orders for durable goods in January, and a decline in pending home sales, with the latter undoubtedly influenced by the limited available housing inventory and the rise in prices. Even so, the housing sector remains strong, on balance, as does the economic outlook (more below). Then, after the early comeback, stocks meandered about into the lunch hour, with the backing and filling leaving the market about where it had ended matters this past Friday.
The market then firmed up modestly in the afternoon on optimism about this evening's speech by Mr. Trump, with the bulls wanting to hear more of an economic message on tax cutting and deregulation and less of a message on economic populism. Then, there is the matter of Federal Reserve policy. Until recently, the guessing had been overwhelming that the central bank would hold the line on interest rates at its mid-March FOMC meeting. Now, the guessing is about even on that possibility.
Still, traders seem impressed enough with the President's message to date that even with the prospect of higher rates, stocks continue to rise, and yesterday afternoon's performance, in which the Dow came back to climb very modestly back into the plus column, was indicative. Bond yields also rose, with the return on the 10-year Treasury note rising to 2.37%. The companion 30-year Treasury bond's yield edged up to 2.99%. As to the stock market, it rose for much of the afternoon, but rather gingerly.
All told, equities closed the session a bit higher, with the Dow securing a 12th straight record closing high, adding 16 points, to end matters at 20,837. The S&P 500 Index nudged up two points and the NASDAQ and the small-cap Russell 2000 gained 17 and 13 points, respectively. Gaining stocks, meantime, led declining issues by a solid margin on the NYSE. Looking ahead, meantime, we see that the markets in Asia were mixed in trading overnight, while equities are a bit lower in Europe this morning. Our futures are now pointing to a flat-to-lower open today.
Finally, in economic news, the government has just reported fourth-quarter GDP growth of 1.9%. This was the second look at that period's growth, and is based on more complete data than in the prior estimate issued a month ago. Initially, the government had estimated that GDP also had gained 1.9% during the final three months of 2016. Thus, the general picture of economic growth remains largely the same. In sum, the increase in personal consumption expenditures was larger and increases in state and local spending and in nonresidential fixed investment was smaller than previously estimated a month before. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
