After the Close
Stocks opened sharply lower this morning, but managed to recover quite a bit in the afternoon. At close of the session, the Dow Jones Industrial Average was down roughly 46 points; the broader S&P 500 Index was off slightly; and the NASDAQ was ahead 12 points. Market breadth was largely mixed, with decliners about even with advancers on the NYSE. Moreover, the major market sectors were divided. The healthcare and technology stocks displayed leadership, while the financials and the energy names were areas of weakness.
There was limited economic news released this morning. However, tomorrow will be a busier day for reports. Of note, we will get a look at the Case-Shiller Home Price Index for the month of January. In addition, the Conference Board is slated to release its consumer confidence report for the month of March. Meanwhile, many on Wall Street may still be digesting the recent developments in Washington. Last week, the Trump Administration had difficulty introducing its American Health Care Act. Now, some traders might be concerned that there will be problems moving ahead on other issues, as well.
Meanwhile, few leading corporations posted financial results this morning. However, we will hear shortly from Carnival Corp. (CCL) and Darden Restaurant Group (DRI). Meanwhile, the first quarter of 2017 will soon be drawing to a close, and some companies may issue pre-announcements or guidance revisions before earnings season starts up in a few weeks.
Technically, stocks spent much of March consolidating. Recent trading brought the S&P 500 Index to its 50-day moving average, located at about 2,330. Perhaps, the broad market index will find some support at this key level. – 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 - 11:45 AM EDT
The major U.S. equity indexes started the session markedly lower today and are holding most of the losses as we near the midday hour on the East Coast. Worries about the House of Representatives’ decision to table the vote on the healthcare reforms put forth by the Trump Administration and Speaker of the House Paul Ryan on Friday, due to a lack of support, and what that will mean for Trump’s other pro-business initiatives, including corporate tax reforms, are weighing on the world’s equity markets. The U.S. stock market had rallied significantly since the November U.S. Presidential election on hopes that Trump would have success with his business-friendly policies.
Nearing the noon hour on the East Coast, the large-cap Dow Jones Industrial Average and the broader S&P 500 Index are down around a half-percentage point. The NASDAQ also is in negative territory, but some modest strength in the healthcare sector is limiting the losses in that composite. There is a notable bearish tone to trading, as the losses are even wider for the small-cap Russell 2000 and the S&P Mid-Cap 400 Index, which also is not a good sign for the bulls heading toward the second half of today’s session. There is a plurality of declining issues on both the Big Board and the NASDAQ.
As we noted in our pre-market commentary, there was little economic or earnings news of note this morning to divert the investment community’s attention away from Washington D.C., where the contentious partisan feelings in Congress is not being well received by investors. Fears that some of President Trump’s business-friendly initiatives will face an arduous battle on Capitol Hill, much like the proposed healthcare reforms just did, is hurting equities that rose on hopes of some changes were coming in Washington D.C. Our sense is that the calls for tax reforms will be a fluid situation for the market over the coming weeks and months, and may produce some notable swings in trading. Right now the tidings from Washington D.C. are giving the bears a sizable boost.
From a sector perspective, there are nearly all down arrows among the 10 major equity groups. The only advancer of note is the healthcare category, where news that the plan to overturn the Affordable Care Act has hit a roadblock is helping the fortunes of the stocks of the managed care facilities and the pharmaceutical companies. Conversely, the economic sensitive groups (i.e., basic materials, energy, industrial, and financial) are notably in the red. It should be noted that a weaker U.S. dollar is not helping the commodities. The U.S. Dollar Index traded near the $99 level this morning compared to its 52-week high of $103.82 on January 3rd. The index is continuing its recent negative trend against the basket of constituent currencies.
Looking ahead to the second half of today’s session, market fundamentals, many of which were noted above, clearly suggest that it will be very tough for the bulls to turn the tide on the recently emboldened bears. The aforementioned weaker greenback and a drop in oil prices today also is pressuring stocks. In general, the nervousness on Wall Street is pushing investors toward safer holdings, with gold and bonds the beneficiaries. The S&P 500 Volatility Index (or VIX), also known as the “fear gauge” is up again this morning, highlighting some of this skittishness among investors. Stay tuned. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
There has been a recent pickup in volatility on Wall Street. Some unsettling events out of Washington D.C. have emboldened the bears, which were battered by the bulls for the better part of a three-month span beginning with last November’s U.S. Presidential election results. The investment community was enthused that Donald Trump’s win would likely bring a number of business-friendly initiatives and regulation rollbacks to Capitol Hill. However, the first big initiative, the repeal and replacement of the Affordable Care Act, has met great resistance in Congress, with the new healthcare reform unveiled by the Trump Administration and Speaker of the House Paul Ryan not garnering enough votes in the House to push the legislation on to the Senate. The roadblock in the House also raised doubts as to whether President Trump will be able to get his forthcoming comprehensive tax reform plan passed, at least by the end of this year. Those concerns gave a boost to the bears last week.
The U.S. equity market turned in its worst performance in quite some time last week. Indeed, it was the worst five-day stretch for the Dow Jones Industrial Average and the S&P 500 Index since before the election of Donald Trump as the 45th President of the United States. Likewise, the technology heavy NASDAQ Composite suffered its most significant losses since the last week of December. As noted, Wall Street’s concerns about the contentious battle over healthcare reform on Capitol Hill, and what it will mean for other Trump Administration initiatives took its toll on equities. In addition to the selloff in the large-cap market, there also notable profit taking in the small- and mid-cap sectors. On Friday, the bears were able to produce respective losses for the Dow 30 and the broader S&P 500 Index of 60 and two points. The NASDAQ, though, helped by the technology and healthcare stocks, was able to finish 11 points to the upside in a directionless session for Wall Street. Overall, advancing issues finished ahead of the decliners, but the spread was rather thin on both the NYSE and the NASDAQ. There also was a mix of up and down arrows among the 10 major equity groups. Our sense is that investors did not want to make major moves ahead of the healthcare news from Capitol Hill that came very late in the session on Friday.
The lack of many headline events from the business beat and Corporate America also had investors focusing more on Washington D.C. last week, which worked in the favor of the bears. On the economic front, the news was mixed, as February existing home sales fell, but sales of new residences surged. Durable goods orders were strong. The economic news did not have much of an impact on trading. Conversely, the news from the corporate world was discouraging, with several more weak quarterly reports from the struggling retail sector. The stocks of NIKE (NKE - Free Nike Stock Report), The Finish Line (FINL), and GameStop (GME) all fell sharply after the retailers report disappointing results, but maybe more telling issued weak guidance for the current year. Looking ahead to this week, the earnings reporting calendar is light, but we will see a modest pickup in economic data, with reports due on consumer confidence, personal income and spending, consumer sentiment, and the final revision to the fourth-quarter 2016 GDP estimate. That said…
We expect the investment community to take its cue from the developments on Capitol Hill and from the White House. Last week, the tidings from Washington D.C. had the biggest impact on the equity market—and we expect that to be the case once again on Wall Street this week. Also any commentary from Federal Reserve officials on monetary policy may also have an impact on the market.
With less than an hour to go before the commencement of the new trading week stateside, the U.S. equity futures are indicating a notably lower opening for the U.S. stock market. The main indexes in Asia were down sharply overnight, while the major European bourses are in the red, as trading moves into the second half of the session on the Continent. The anxiety over Friday’s canceled vote on healthcare reform has unnerved investors around the globe, as it brings into question how successful President Trump will be in getting his pro-business agenda through Congress. Stay tuned. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
