After the Close
Stocks opened moderately higher today, but soon slipped into negative territory. Further, by the close of trading, the major averages were unable to successfully recover any ground. Specifically, the Dow Jones Industrial Average was down 238 points; the broader S&P 500 Index was off 29 points; and the NASDAQ was lower by 108 points. Market breadth was unfavorable, with losers leading winners by a wide margin on the NYSE. From a sector perspective, the financials and the basic materials issues were quite weak, while the high-yielding utilities, often seen as a safe haven, managed to advance today.
There were a no important economic reports issued this morning. The lack of news may have had traders looking elsewhere for direction. No doubt, many on Wall Street have been closely following the shifting political landscapes both in the United States and abroad. Tomorrow, the pace of reports should pick up a bit. Specifically, the existing home sales figures for the month of February are due out. In addition, the latest FHFA Housing Price Index is slated to be released.
Meanwhile, a couple of major corporations weighed in with their results over the past 24 hours. Specifically, shares of General Mills (GIS) traded lower. The food manufacturer delivered decent results, aided largely by lower costs. Further, shares of Lennar Corp. (LEN) moved down, as investors were possibly concerned about the home builder’s outlook. Of note, after the market closes, Dow component NIKE (NKE – Free NIKE Stock Report) and transportation giant FedEx (FDX) issue their reports.
Technically, since the start of March, stocks have encountered some resistance. Specifically, the S&P 500 Index hit the 2,400 level briefly on an intra-day basis but was then unable to move any higher. Nonetheless, it should be noted that some consolidation, and even some profit taking, can be healthy, assuming the bulls regain their strength in the coming weeks. – 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 - 11:40 AM EDT
Following yesterday's uneven and uneventful session, stocks started this morning nicely to the upside. That initial strength followed mostly mixed sessions in Asia and Europe earlier in the day. Emboldening traders early on today was a pickup in crude prices, as oil watchers were gaining confidence that OPEC's agreed-upon output curbs might well be extended. Lower bond yields, the yield on the 10-year Treasury note had slipped to 2.45%, also had increased the buying enthusiasm among the bulls.
But this early buying binge, which saw the Dow Jones Industrial Average gain just about 65 points in the first few minutes, was reversed rather quickly. In fact, by the end of the first hour of trading today, the Dow had given back that entire gain, as well as another 50 points. And that was only the start. Meantime, the S&P 500 Index and the NASDAQ, also nicely higher early on, had fallen into negative territory, while the losses in the S&P Mid-Cap 400 and the small-cap Russell 2000 had soared, in particular for the former.
What brought about this turnaround? In addition to a subsequent reversal in oil prices, was the likelihood of angst about the U.S. political situation, most notably concerning the fact that Congress and the White House were locked in a debate to remake the nation's health care law. Further, there is uncertainty about U.S. trade policies and how fast the Federal Reserve will seek to tighten the nation's monetary policy. Readers will recall that the Fed raised interest rates last week for the third time during this business expansion.
The emboldened bears drew more confidence as the morning progressed, with stocks falling precipitously by 11:00. In all, the Dow sank by more than 140 points at that time, with similar proportionate losses in the other key large-cap indexes. The mid- and small-cap indexes did notably worse, with the S&P Mid-Cap 400 tumbling by a percentage point and a half. Goldman Sachs (GS – Free Goldman Stock Report) led the retreat among the Dow stocks. Also falling sharply was apparel retailer Under Armour (UAA). Worries about the proposed health care law seemed to be heading the list of concerns.
The fear is that failure in this area could delay or derail popular Administration efforts in such areas as tax reform, deregulation, and infrastructure spending. Uncertainty about the fate of repealing and replacing the Affordable Care Act (a vote by House Republicans is due to be held on Thursday), as noted, is the main concern as we get near to noon in New York.
As to the stock market, losing issues are swamping winning stocks by well over three to one on the Big Board, while nine of the 10 leading equity groups are in retreat, led lower by the basic materials. As to the indexes, themselves, the Dow is off 200 points; the S&P 500 Index is lower by 24 points; and the NASDAQ is in the red to the tune of 79 points. Worse, the S&P Mid-Cap 400 and the Russell 2000 are lower by more than 1.6% each. So, we seem to be headed for a major retreat as we reach the lunch hour on the East Coast. – 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 a mostly weaker session in Europe early yesterday morning and a further fall in crude oil prices at home, stocks opened a bit to the downside in New York. Recurring concerns about the Federal Reserve policies, U.S. health care legislation, and the political and international situation in general, took the initial measure of the bulls. But as there was little new on the market agenda, there was no urgency to sell en masse. So, stocks threw off their initial losses and proceeded to start moving nominally higher by the end of the first half hour of trading.
The market then proceeded to gain selectively over the remainder of the morning, and as we began the afternoon, the Dow Jones Industrial Average and the NASDAQ were both showing small increases, while the S&P 500 was a tad lower. The small-cap Russell 2000 was also off. Meantime, as there was a clear divide among the major equity sectors, as to gainers and losers, and there still were more stocks falling in price than gaining in value, there did not seem to be much in the way of enthusiasm among either the bulls or the bears.
The lack of momentum on the buy side would continue as the afternoon unfolded. with the market moving in and out of negative territory, but never straying very far from the neutral line. As to the above market worries, several Fed speakers opined on the course of monetary policy, with the general consensus being that the central bank may wait until the June meeting before raising interest rates again. Some cited inflation for their view, sensing that there is not enough pricing pressure as yet to justify another rate hike.
Then, there is the political backdrop, where the Republicans in Congress are trying to fashion a new health care law to replace the Affordable Care Act. The fear among Wall Street traders is that a failure to come to an agreement on this matter could jeopardize efforts at tax reform, deregulation, and infrastructure spending. So, the next couple of weeks should be interesting. Then, there is earnings. With the first quarter winding down, company forecasts followed by reported results are just weeks away.
Regarding yesterday's late action, stocks continued to meander about with no direction right into the close. At the conclusion of trading, in fact, the market was roughly back to where it started the day. As to a final bias to the session, it was nominally to the downside, with six of the 10 major equity groups in the red, led lower by the utility sector. On the other hand, the basic materials group was nicely higher. All told, the Dow shed nine points; the S&P 500 lost five points; and the Russell 2000 was off seven points, while the NASDAQ was flat.
Looking out at a new day now, and following this unimposing start to the new week, we see that stocks were mixed in Asia overnight, while the key bourses are also on an irregular course in Europe thus far this morning. Elsewhere, oil prices are trending higher in New York, after falling further yesterday, while interest rates are moving up a little so far in early dealings. As to U.S. futures, the early read is nicely higher after a generally mixed session to start the new week. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
