After the Close
The major U.S. equities were lower for most of Tuesday, continuing yesterday afternoon’s bearish tone amidst some increased concerns over geopolitical tensions. The Dow shed as much as 100 points in the morning sell off before recovering somewhat in the early afternoon. The broad-based S&P 500 and NASDAQ followed a similar pattern, though neither came close to passing the breakeven threshold. Of course, with the Passover holiday underway, today’s movement has been exacerbated by reduced trading volume. And, market breadth favored advancing issues by day’s end, as small- and mid-cap equities performed markedly better than the large-cap sect.
The United States’ sudden involvement in the Syrian Civil War has sowed some uncertainty in the market since Friday. Additional military activity may distract from key economic policies, such as tax reform and deregulation. Fears over the latter were assuaged, briefly, when President Trump remarked to a group of executives that his administration still planned to revamp or replace key financial oversight measures. Still, optimism from the comments was unable to sway the large-cap averages, which remained in the red from bell to bell.
Also weighing on investor sentiment this morning were comments made by Federal Reserve Chair Janet Yellen during her speech at the University of Michigan. The remarks came after Monday’s closing bell, so her suggestion that the Fed’s goal is turning toward sustaining growth, rather than stimulating it. This echoes recent updates from the Fed that have revealed a central bank wary of elevated market valuations and determined to pare its bloated balance sheet.
Meanwhile, oil remains one of the beneficiaries of the recent global strife. U.S. crude oil added $0.32 per-barrel, as Syrian and Libyan field shutdowns boost momentum. Also spurring today’s upward movement was news that Saudi Arabia wants to extend the OPEC production cuts, a six-month agreement that expires in July that has thus far been successful at addressing a global surplus of inventories.
Though the losses on the indexes narrowed in the second part of the day, the session ultimately went to the bears. The NASDAQ was the biggest laggard, as the technology sector was the worst performing sector. By the end of the week, corporate earnings season will have started. Investors will look to see how companies forecast their profit goals amidst historic debt levels and a tightening monetary environment. The post-election rally has stagnated in recent weeks, so the first-quarter filings will play a large role in determining which path the market takes in the coming weeks. – Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Mid-Day Update - 12:20 PM EDT
The U.S. equity markets opened today’s session to the downside, and largely added to their losses as the morning wore on. Traders’ attention appears to be focused on recent geopolitical concerns. However, as was the case yesterday, trading volume is light, reflecting observance of the Jewish Holiday of Passover. As such, small moves will tend to be amplified.
The Asian markets put the first brushstrokes on the day’s canvas, with most of the main indexes modestly lower in overnight trading. On our shores, there hasn’t been any news of note to drive stocks either way. The U.S. Labor Department reported that job openings at the end of February had increased 2.1% versus January’s reading. Meanwhile hirings declined 2.1% over the same period. Elsewhere, it was reported that optimism among small-business owners fell in March, marking a second-consecutive down month after a huge surge in the wake of November’s elections.
As we crossed the noon hour in New York, the key U.S. indexes were all in negative territory, though up slightly from their morning lows. The Dow Jones Industrials and the S&P 500 had each shed about half a percentage point, while the NASDAQ composite was faring slightly worse, down nearly three quarters of a percent.
All of the major equity groups are in the red, with the biggest decliners being technology shares (down 0.8%) and energy stocks (down 0.6%). Meanwhile, consumer non-cyclicals and energy issues have held up better than most, each falling only fractionally below the unchanged mark.
Meanwhile, the S&P Volatility Index (VIX), which leapt nearly 10% yesterday despite muted activity, has advanced a similar amount today, suggesting growing trepidation on the part of traders. In line with this move, gold prices were up 1.6%.
Sentiment among European traders also appeared to be largely negative. London’s FTSE put in the best showing. After spending most of the day in positive territory, the mood changed in the afternoon, sending the index back below breakeven. However, a rally ahead of the closing bell put stocks modestly back in positive territory. France’s CAC-40 echoed this movement, though its recovery fell short of the unchanged line (down .1%). Meanwhile, Germany’s DAX had the toughest go of it. After struggling to break even most of the day, the late afternoon selloff dragged it down to a loss of about 1%, of which it only recovered about half. – 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
The first trading day of the holiday-shortened trading week—the U.S. equity market is closed on Friday for Good Friday—was a nondescript one for those long equities. For the most part, the major equity averages traded in a tight range around the neutral line, bouncing in and out of positive territory before ultimately settling slightly to the upside. The trading pattern was not unexpected, as it was a light day of news on both the economic and earnings fronts and many traders took the day off in observance of the Jewish holiday of Passover. Trading might play out the same way today, as the same variables will probably be in play.
In general, we don’t expect investors to make many big moves ahead of the fast-approaching earnings season. Our sense is that the earnings news will prove constructive stocks when the festivities will kick off later this week. A number of big banks, including JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report) and Wells Fargo & Co. (WFC), will report their latest quarterly results ahead of the long holiday weekend.
From a sector perspective, most of the major equity groups finished yesterday in positive territory. The leadership came from the energy and basic materials stocks. The energy issues were helped by a jump in oil prices, which hovered around $53 a barrel for much of the session. Escalating geopolitical tensions in the Middle East after the U.S. launched a missile attack against the al-Assad regime following its use of chemical weapons in Syria. The turmoil in the Middle East pushed prices higher, even after reports last week showed a build in crude stockpiles. However, it was not all wine and roses among the top equity groups, as we saw some selling in a few of the higher-yielding areas and some nominal backtracking in the technology sector.
Meantime, the day at hand will look similar to the week’s first session, as there is little news of note on from either the business beat or Corporate America. The lack of data will probably result in another low volume trading day on Wall Street. As noted, we expected traders to show some patience ahead of the fast-approaching first-quarter earnings season. Against this backdrop, we would not be surprised if investors turned their attention to Washington D.C. The news from the nation’s Capital has not been overly uplifting in recent days. Among the headlines recently were a U.S. missile attack on Syria last Thursday and reports that the U.S. Navy is moving close to the Korean peninsula as a show of force against North Korea’s continued nuclear missile testing. It should be noted that with these unsettling events overseas, the S&P Volatility Index (or VIX), also known as the “fear gauge,” rose nearly 10% during yesterday’s session, suggesting that investors are worried about the escalating geopolitical tensions.
With less than an hour to go before the commencement of trading stateside, the equity futures are presaging a modestly lower opening for the U.S stock market. That said, much like yesterday, we don’t expect the major averages to stray too far from neutral line with little fresh news of note on Wall Street this morning. Overnight, the main indexes in Asia were lower, while the major European bourses are putting in a mixed performance as trading moves into the second half of the session on the Continent. At first blush, it is looking like the bears will try to capitalize on the geopolitical concerns on a day that will be light on economic and earnings data. 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.
