After the Close
The U.S. stock market retreated earlier this morning, but managed to regain considerable ground as the session progressed. At the end of trading, the Dow Jones Industrial Average, and the S&P 500 Index were nominally higher, while the NASDAQ was up roughly 10 points. Market breadth highlighted the session’s divided tone, as decliners were just about even with advancers on the NYSE. A number of equity groups made progress today. Specifically, leadership was seen in the financial, healthcare, and basic materials issues, while weakness was found in some of the consumer names, as well as in the utilities.
Traders received just one notable economic news item today. Specifically, the ISM Non-manufacturing Index delivered a reading of 57.6 for the month of February, which was a bit better than had been anticipated, and also slightly higher than the 56.5 figure registered in January. Going forward, at the end of next week the government is slated to release its February employment report, and that issuance will likely receive a good deal of attention. Of note, the economy has been progressing quite well lately, and many on Wall Street believe that the Federal Reserve will tighten its monetary policy, as needed. However, it remains to be seen if the stock market can maintain its upward course, if the Fed becomes much more active.
Meanwhile, on the corporate front, we recently heard from a few widely followed corporations. Specifically, shares of Costco (COST) slumped, after the big box retailer delivered a weaker-than- expected report. Also in the retail area, shares of Big Lots (BIG) moved up, after that company posted an encouraging set on numbers, accompanied by an upbeat outlook.
Technically, stocks have displayed considerable strength lately. The fact that buyers stepped in when the market declined earlier today, suggests that bullish sentiment remains intact. For now, the S&P 500 Index is sitting just under the 2,400 mark, and that will likely be an area to watch closely. – 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 - 12:10 PM EST
The U.S. equity markets started the day with a brief spurt to the upside, but have largely traded down as the morning session wore on.
Market-moving news has been scant today. We did get a positive report from the Institute for Supply Management, which said its non-manufacturing index came in at 57.6 % in February, up from 56.5% the previous month and the highest rate of expansion since October of 2015.
This afternoon, the market’s attention will be focused on Federal Reserve Chair Janet Yellen who will be speaking at The Executives Club of Chicago. Recent comments by Fed members have raised expectations that interest rates will inch upward at its two-day meeting this month that concludes on the 15th.
As we pass the noon hour of trading in New York, the major indexes had all bounced off their session lows, but remained on the negative side of the ledger. The Dow Industrials, which very early on had reclaimed as much as 37 points from yesterday’s 113 point drop, was down by 29. Meanwhile, the broader S&P 500 Index, which had its biggest drop of the year yesterday (0.59%), was off by four points, with six of the 10 key equity groups in the red. The tech-heavy NASDAQ composite Index was down by 10 points.
Elsewhere, oil has regained some lost ground. Prices took a 2% hit yesterday when it became known that Russia was not fully complying with its agreement with OPEC. Its output for February stood at 11.11 million barrels a day (BPD), or about 200,000 BPD over of what it had promised to cut back to. Meanwhile, U.S. crude oil inventories have risen for eight consecutive weeks, to a record 520.2 million barrels. Crude oil futures were trading at just over $53 a barrel, up nearly a full percentage point.
Taking a look at the overseas bourses, traders there also appear to be treading cautiously. London’s FTSE has spent the entire day in the red, but inched up throughout the session to where it was just modestly in the loss column as the closing bell approached. Germany’s DAX has also kept to negative territory. Following a failed mid-day rally, it was down by about a third of a percentage point. Meanwhile, France’s CAC-40 managed to buck the trend, and was holding onto a gain of about half a percent in late afternoon trading. – Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before the Bell
As to the market, the early selloff was never significant. In fact, the Dow was in and out of the red for the first hour, while the other indexes, notably the S&P 400 and 500 and the NASDAQ were all modestly below the break-even mark. As to the Fed, a couple of weeks ago, there appeared to be about a 20% chance of a rate hike this month; now, the guessing is that there is about a 65% chance for such an increase. Meanwhile, in other news at the outset of trading, the Labor Department came out with data showing that weekly jobless claims had fallen to 223,000 in the latest week, well below expectations of 243,000.
So, with the employment picture clearly brightening and with inflation still under control, any Fed move is likely to be modest, with at most three hikes likely to be voted for this year. As a result, Wall Street seems to be little disturbed by the growing likelihood of an imminent tightening and follow-up moves this year. Even so, Treasury yields are climbing again, with the 10-year Treasury note rising to 2.50% in early dealings yesterday. That's still below the 12-month high. But the two-year note is up to its highest level in the past year. Meantime, stocks remained lower into the lunch hour, but the losses were quite modest.
However, the deficits soon deepened, especially for the S&P Mid-Cap 400 and the Russell 2000, which saw losses approaching a full percentage point. Declines of less than half a percentage point were the norm at the time for the larger-cap composites. The deficits then deepened somewhat into the middle of the afternoon, but still generally remain range-bound. In all, eight of the 10 key equity groups were off, with basic materials, a big winner on Wednesday, the largest casualty at that point. Moreover, losing issues were topping winners on the NYSE by about a five-to-two ration. The gap was slightly narrower on the NASDAQ.
Things started to worse as the close neared, with the Dow's loss, once modest, increasing to 113 points, as the bell sounded. The percentage losses on the S&P 500 (0.59%) and the NASDAQ (0.73%) were greater, as were the declines on the S&P Mid-Cap 400 (1.13%) and the small-cap Russell 2000 (1.17%). It was a case of profit taking, in the main, but also some worries ahead of both next Friday's jobs report and the following week's FOMC gathering, where an interest rate hike is growing likely.
Looking out now to a new day, we see that stocks closed moderately lower in Asia overnight, while in Europe, the leading bourses are now posting small declines, in the main. As to our futures, on a day that also will see the Institute for Supply Management release the latest figures on non-manufacturing activity and several Federal Reserve officials, including Chair Janet Yellen, give their take on the economy, they point to a slightly weaker opening when trading resumes. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
