After The Close
Investors experienced another tug of war on Wall Street today as stocks swung from a nice gain early to steep losses by late morning, and closed notably to the downside.
At the end of the day, the Dow Jones Industrial Average finished off 249 points, swinging lower from a morning gain of more than 120 points. Similar volatility was experienced on the other major averages, with the S&P 500 shedding 16 points and the NASDAQ dropping 14 points.
Not surprisingly, more shares fell than rose on both the New York Stock Exchange and the NASDAQ.
One stock in particular, Boeing (BA – Free Boeing Stock Report) seemed to be typical of the session’s trading patterns. The aerospace giant uses large quantities of the types of metals that tariffs have been proposed for. When sentiment in the investment community becomes negative over the prospect of more expensive materials, Boeing shares feel the heat. Some of that conviction was on display today, with the stock pushing the Dow Industrials up and down more than most. Boeing could also lose orders if foreign governments angry at any tariffs imposed instead purchase planes from Airbus, the company’s European competitor.
Concerns over the implementation of tariffs are part of the bigger picture that points to more things for investors to be concerned about. The President’s incoming top economic advisor, Larry Kudlow, has indicated opposition to tariffs, but may be willing to use the threat of tariffs in trade negotiations.
Rising interest rates have unnerved the market at times, as well. The yield on the benchmark 10-year Treasury note jumped up to around 2.90% from 2.50% in a short period of time earlier this year, causing market volatility. Today, though, the yield on the 10-year T-note fell to 2.82% from 2.85%, with its price rising, partly on a flight to perceived safety as stocks dropped.
Bond prices also picked up as a result of a weaker-than-expected figure on February retail sales. Surprisingly, consumer spending has come in light to begin 2018 after showing promise near the end of 2017.
Further upward pressure on yields could come next week when the Federal Reserve is expected to raise short-term rates by a quarter of a point.
In terms of the stock market’s major sectors, only the defensive utilities group turned in a positive showing, indicating investors’ state of mind today.
— Robert Mitkowski
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Another day, another theme on Wall Street. For example, last Friday, it was the February employment report that gripped the stock market. And on that occasion, it was a strong increase in non-farm payrolls of 313,000 last month, which lit a fire under the bulls sending the Dow Jones Industrial Average up 440 points and the NASDAQ to yet one more all-time high. What helped the bulls was that while job totals were soaring, hourly wages were just gaining modestly, thereby keeping inflation concerns under control. Then, on Monday, it was renewed concerns about the imposition of tariffs on steel and aluminum, which threw the bulls off stride.
Specifically, worries about the ramifications of a possible global trade war contributed to sending the Dow back down more than 150 points. But the NASDAQ jumped to another record high, gaining nicely for the session, as the perception was that the big industrial concerns, many of which are domiciled on the blue chip composite, would be hurt more by the tariffs than the tech stocks, which largely dot the NASDAQ. Then, yesterday, it was primarily the report of the Consumer Price Index, which came in on target for the month of February that sent the bears running for cover again.
As to the CPI, the data showed that the headline increase of 0.2% for last month was in line with expectations, while the core CPI, that is excluding the volatile food and energy components, came in at 0.2%, as well, which was also in line with forecasts. So, as inflation fears retreated, the market rose initially, with the Dow surging to an early gain of just under 200 points. However, the market softened a bit after the first hour, with the Dow giving back about two-thirds of that early advance before again stiffening its resolve and heading higher.
However, that comeback would prove short-lived, and as we headed toward the lunch hour in New York, additional selling took hold, with more of the Dow's gain erased and with the NASDAQ, a bulwark on Monday, moving into the red on some slippage in tech. Encouraging for the bulls, though, the selling seemed orderly, and yields on the 10-year Treasury note actually eased from 2.87% to 2.86% on lessening inflation worries following the benign CPI increase. Still, the easing in yields notwithstanding, the Dow also capitulated as noon arrived, joining the S&P 500, the NASDAQ, and the Russell 2000 in the red.
The selloff deepened as the afternoon got under way, with our sense being that the announced firing of Secretary of State Rex Tillerson earlier yesterday morning was finally having some effect on market sentiment, with skittish traders perhaps wondering who is next, as turnover in Administration personnel increases. Then, after the Dow's deficit had swelled to just over 100 points, some buying again surfaced, with that rally again short-lived, as the market foundered anew as we moved inside the final two hours of trading. Meantime, the NASDAQ led the way lower, falling more than a percentage point in mid-afternoon.
The selling then intensified as the afternoon wound down, with the Dow tumbling by more than 200 points late in the day, while the NASDAQ's deficit swelled to nearly 100 points briefly. The other indexes all fell, as well. Worries about our relations with China also played a role, after the President refused to allow the takeover by Singapore-based Broadcom (AVGO) of Qualcomm (QCOM) to proceed on security concerns. The latter stock tumbled on the news, also dampening buying sentiment. In all, at the close, the Dow and the NASDAQ were down 172 and 77 points, respectively.
Now, a new day dawns, and for a clue to what may happen on our shores, we look across to Asia, where stocks were lower in overnight dealings. In Europe, meantime, the early read this morning is now a bit higher. Also, oil prices are slightly higher so far, while Treasury note yields, which fell to 2.85% yesterday on those benign CPI figures, are now passing hands at the same level Finally, our equity futures are following up yesterday's rout of the bulls with early advances. Looking ahead, it is still up in the air as to what today's theme will be after yesterday's inflation and Administration news. Stay tuned.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
