After the Close
The stock market traded modestly lower for much of the day, before succumbing to some slight selling pressure in the final hour of the session. At the close of trading, the Dow Jones Industrial Average was down roughly 30 points; the broader S&P 500 Index was off seven points; and the NASDAQ was lower by 15 points. Market breadth was quite negative, as declining issues easily outpaced advancers on the NYSE. Most of the major equity groups experienced selling pressure. There was pronounced weakness in the basic materials issues, as well as in the healthcare names. However, the technology and utility stocks displayed a degree of relative strength.
It was a light day for economic news, with one main item released today. Specifically, the nation’s trade deficit widened to $48.5 billion in the month of January from $44.3 billion in December. It should be noted that this month’s figure more or less met expectations and did not likely surprise traders. Tomorrow will be a somewhat busier day, as Automatic Data Processing (ADP) releases its February private employment numbers. Wholesale inventories for the month of January are also due out. Further, for those traders following the commodity markets, the EIA’s weekly crude oil inventory numbers will be reported. While these issuances are of some importance, traders are likely waiting for the February non-farm payroll figures to be delivered early Friday morning, as that release carries considerable weight with the Federal Reserve.
Meanwhile, in the retail arena, a few companies delivered reports over the past 24 hours. Specifically, shares of Dick’s Sporting Goods (DKS) traded lower, as investors were disappointed with that company’s outlook. Further, shares of Casey’s General Store (CASY) slipped, after the convenience store operator provided a weaker-than-expected report.
Technically, stocks have pulled back a bit over the past couple of days. Overall, the S&P 500 Index seems to have run into resistance at the 2,400 mark. So, this may well be an important level to watch in the near future. – 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 EST
After struggling through the day yesterday, before winding up the initial trading session of this week with modest losses, the stock market began today's session once more to the downside. As on Monday, the major averages did not falter significantly, with the Dow Jones Industrial Average losing about 50 points at this morning's nadir, and falling a little further below 21,000 in the process. Modest losses also were suffered initially by the S&P 500 and the NASDAQ. It was a similar story for the smaller indexes, as nearly all sectors eased in price.
Behind this further pullback, which lost momentum as the morning wore on, were concerns about the House's plan to replace the Affordable Care Act and worries about pending monetary tightening initiatives as the Federal Reserve prepared for its FOMC meeting a week from now. Expectations are that the bank will raise interest rates for a third time in 15 months. Biotech and other health care issues, meantime, came in for selling, as President Trump said he was working on a new system in which there would be competition in the drug industry.
Then, there is this Friday's government report on the nation's employment outlook. On point, the Labor Department will issue data, at that time, on non-farm payrolls and the unemployment rate. These separate surveys, particularly the former metric, likely will play a role in what the Fed decides next week. Our sense is that a rate hike will evolve from that gathering, with only a marked deterioration in the payroll situation causing a different outcome when the central bank next convenes.
As to that report, current consensus calls for about 185,000 new positions to have been added in February and for wages to have picked up again. Higher wages, and their inflation implications also will influence Fed thinking, in our opinion. Currently, the odds of an imminent rate hike are about 85%--more than four times the expectation about a month back. To underscore the evolving rate picture, yields on Treasury securities have been climbing, with the yield on the 10-year Treasury note rising past 2.50% this morning. The 30-year bond is now yielding 3.12%.
Meanwhile, as the morning concluded, the market, as noted, did seek to reduce the early damage, with the Dow and the NASDAQ both turning positive for a time. However, that momentum soon abated, and as we neared the noon hour in New York, the Dow Industrials were back in the red by about 30 points. Modest losses were retained by the S&P 500, the S&P 400, and the Russell 2000. The NASDAQ was near the breakeven mark, while, save for technology, all of the leading sectors were still in the red.
Looking out to the afternoon, it seems likely to continue being a struggle, but unless there is additional news of note on the monetary or political fronts, any full-session retreat is likely to be measured. – 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 another week of strong financial market increases, in which the Dow Jones Industrial Average crossed the 21,000 threshold, with room to spare, and the Standard and Poor's 500 Index pushed past 2,400, the market faltered early yesterday. Perhaps it was renewed profit taking after the succession of all-time record closes, or it just might be concerns about the latest military actions from North Korea. Most likely, though, it was the realization that the Federal Reserve is on the brink of again starting up its monetary tightening endeavors.
Specifically, the central bank is scheduled to hold its next FOMC meeting on March 14th and March 15th. Ahead of this upcoming gathering, a series of Fed speakers, including central bank Chair Janet Yellen, have opted in favor of more hawkish musings. Not surprisingly, the odds of an interest rate hike next week, once under 20%, have surged to better than 80%. Wall Street probably can live with a rate hike this month. What could be troubling traders now is what comes next on the monetary front.
On point, if there are the same three borrowing cost increases this year as has been widely expected for a time, the market is probably in fine shape. However, if the Fed is determined to go more quickly and aggressively on this front, the latest bout of profit taking could go further. For now, though, the equity market started yesterday to the downside, and rather notably so, and as the morning concluded, the Dow was off by some 85 points; the S&P 500 Index was lower by 13 points; and the NASDAQ was down by 40 points.
Worse, all 10 of the leading market sectors were in reverse, led lower by the basic materials and the financial stocks, while about four stocks were lower for every issue that was gaining on the day. However, that early pullback proved to be the low point for the session, with the market starting to pare its losses as the afternoon pushed forward into its early and middle stages. The improvement then continued as the day wound down, with investors seemingly having exhausted the profit taking for one day, at least.
The comeback then more or less persisted into the close, as the Dow's final loss, at 51 points, was just over half of its worst deficit for the session, while the lead held by losing stocks over gaining issues, once about four to one, eased to just over two to one. As before, nearly all of the 10 leading market sectors fell on the day. With regard to the other indexes, the S&P 500 shed eight points; the NASDAQ, once off by 43 points, lost 22 points; and the small-cap Russell 2000 was in the red by eight points.
Looking ahead at a new day, and one that figures to again see a focus on the Federal Reserve, as the mid-month FOMC meeting draws ever closer, we see that the principal indexes were higher in Asia overnight. It is more of a mixed tale in Europe so far this morning. As to our futures, they are posting early losses. Meantime, with earnings season now largely in the rearview mirror, and with employment and unemployment data due out this Friday morning, investors will certainly be mindful of the Fed for the next several sessions. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
