After the Close
Stocks moved lower today as the headlines were once again dominated by high-level discussions between Russia and the United States over the future of Syria. At the close, the Dow Jones Industrial Average was down 59 points; the NASDAQ was off 31 points; and the S&P 500 dropped nine points. The broader market was also weak, with declining issues topping gainers by more than a two to one margin on both the New York Stock Exchange and the NASDAQ.
In the big picture, the stock market has had a nice run both this year and since the November Presidential election, so some consolidation is probably normal. The latest global tensions mark the Trump Administration’s initial foray into the extremely difficult and complicated politics of the Middle East, which is making traders on Wall Street a bit uneasy. That is evident in the shift toward the perceived safety of bonds and gold. Gold prices recently touched their highest level since November, and the yield on the 10-year Treasury note has backed off from its highs this year, with bond prices moving higher.
The move into defensive assets was apparent on Wall Street, as well, with the less volatile utilities, telecom, and consumer staples sectors exhibiting relative strength in the just-ended session.
Investors also now appear to be factoring in a delay to anticipated tax reform. The Trump team has indicated that it needs to obtain health care reform in Congress before it can best transform the tax code. Given that the Administration experienced a disappointing legislative setback in its first attempt at health-care reform, the timetable for a broad tax cut has been pushed back. More broadly, the rally in stocks has been partly based on the view that lower taxes are on the way. The deferral of that outcome has taken some steam out of the rally.
In other markets, oil prices moved modestly lower, despite a larger-than-expected drawdown of domestic inventories. The rationale for the move seemed to be that inventories remain stubbornly high, and need to decline more rapidly for prices to regain momentum.
Investors will soon have more to consider, in the form of corporate quarterly earnings. But sentiment clearly has been muted in this holiday-shortened week. Tomorrow is the last day of trading this week ahead of the Good Friday holiday. – Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
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Mid-Day Update - 12:30 PM EDT
The U.S. stock market drifted lower this morning, and has been unable to meaningfully reverse course, so far. At roughly noon in New York, the Dow Jones Industrial Average is down about 59 points; the broader S&P 500 Index is off eight points; and the NASDAQ is lower by 25 points. Market breadth suggests some underlying softness to today’s session, with decliners easily ahead of advancers on the NYSE. Most of the major equity groups are in negative territory, with substantial weakness in the industrial and basic materials issues. Within this area, shares of metals producers are off sharply. Meanwhile, some of the consumer names are bucking the downtrend.
There was just one key economic news item released this morning. Specifically, import and export prices rose slightly during the month of March. Tomorrow will be a busier day for news. Of note, the weekly initial jobless claims are due out. Further, the University of Michigan will weigh in with a consumer sentiment figure for the month of April.
Meanwhile, a few leading companies reported their financial results over the past 24 hours. Specifically, shares of Fastenal (FAST) are trading lower, as investors seem concerned about the company’s business outlook. However, shares of Delta Airlines (DAL) are moving up in response to a decent release. Tomorrow, we will hear from some of the nation’s top banks, as JP Morgan Chase (JPM - Free JP Morgan Chase Stock Report), Wells Fargo & Co. (WFC), and Citigroup (C) are slated to deliver their results.
Technically, the stock market has been a bit directionless lately. However, as the first-quarter earnings season starts up the situation may become clearer. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
A quick glance at the major equity averages yesterday would have suggested the bears were the winners—and for a stretch it was clearly looking that way—but that was not the case yesterday. Although the Dow Jones Industrial Average, the tech-heavy NASDAQ, and the broader S&P 500 Index all finished modestly lower for the day, the bulls did have their moments. There was a plurality of winning issues on both the New York Stock Exchange and the NASDAQ, and nearly all of the major equity groups finished in positive territory. It should also be noted that the broader small-cap Russell 2000 and the S&P Mid-Cap 400 Index finished the session comfortably in the black.
As was the case on Monday, there was little economic or earnings news of note to push the needle forcefully in either direction yesterday. The dearth of data once again had the investment community focusing on Washington D.C. and the escalating geopolitical tensions. The S&P 500 Volatility Index (or VIX), also known as the “fear gauge,” hit its high-water mark for the year during yesterday’s session on the international worries. In general, concerns over the rising tensions between the United States and Russia, Syria and North Korea drove investors into gold and other safe-haven assets. The yield on the 10-year Treasury note, which moves inversely to the price, fell below 2.30% yesterday, as traders gobbled up fixed-income securities.
There was a definite move to safety yesterday, but the buying was not confined to the more-defensive stocks. In fact, eight of the top 10 sectors finished in positive territory. The only laggards were the energy and technology stocks. However, other than the basic materials groups, the buying interest was rather minor among the other categories.
The rally that took place in the second half of the session and helped to pare most of the early losses for the Dow 30 (down more than 100 points at one point), the NASDQ, and the S&P 500 Index, was driven mostly by commentary from President Trump. Specifically, the President, during a meeting with chief executives of U.S. companies, said his Administration was working hard to reduce regulations and revamp the Dodd-Frank Wall Street reform law, which he said may ultimately be eliminated and replaced. That commentary was greeted warmly be traders. The President also noted that healthcare reform may be revisited again in 2017, and he will push to get tax reforms passed later this year. The business friendly comments helped the stocks of the smaller-cap companies even on a day when we learned that small business confidence slipped a bit in March.
Looking at the session at hand, it will be another quiet day on both the earnings and economic fronts. This will be the last time we will say such, as tomorrow will bring the start of first-quarter earnings season with a slew of reports from the banking giants, including the latest quarterly data from Dow-30 component JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report). Against this backdrop, we would not be surprised if trading volume was light during today’s session. Also this week, we will get data on producer and consumer prices, as well as the latest reading on retail sales. All of the economic data will be closely scrutinized by the Federal Reserve, which appears to be leaning toward tightening the monetary reins in the coming months.
With less than an hour to go before trading begins stateside, the equity futures are presaging a slightly lower opening for the U.S. stock market. Overnight, the main indexes in Asia were mixed, while the European bourses are trading nominally higher, but not too far removed from the neutral line as trading moves into the second half on the Continent. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
