After the Close
After an uninspiring few days of trading, U.S. stocks looked poised to finish the four-day week on a high note, as each of the three major indexes boasted gains through the first several hours of trading. Then, shortly after noon in New York, news broke that the United States had dropped a mega-bomb on Afghanistan, quickly sending the averages below the day’s breakeven line. The military action was the most recent chapter in what has been a highly active couple of days in the geopolitical arena. Last Thursday night, a missile strike in Syria heightened tensions with Russia, while this week’s overtures on potential changes to the U.S. policy on North Korea have also caused some uneasiness in the market. Concerns that the implementation of several key economic reforms from the Trump Administration (taxes, deregulation, infrastructure, et al.) will be delayed amidst a growing number overseas engagements will probably linger until real clarity on some of these issues is offered.
The breaking news overshadowed generally positive news from the business beat. Traders received updates on jobless claims, consumer sentiment, and producer prices. The latter dipped in the month of March, in line with expectations, and indicates that inflation-related stresses are unwarranted at this juncture. The employment picture got a boost with a 234,000 jobless figure, an unexpected dip following last week’s disappointing monthly employment release from the Labor Department.
Meanwhile, earnings season is beginning to heat up. Shares of banking giants JPMorgan Chase (JPM – Free JPMorgan Stock Report), Citigroup (C), and Wells Fargo (WFC) followed divergent paths in the morning hours. While the former two rose initially on solid quarterly reports, all three finished the day in the red following the broad-based selloff in the afternoon. Corporate earnings will play a larger role in dictating market movements in the coming month, which the bulls are hoping can help to reinvigorate what has been a relatively stagnant equity market for several weeks. And, if companies exhibit the anticipated 10% earnings growth for the first quarter, we think another bullish streak in trading is likely.
Still, with international developments unlikely to fade from trader consciousness in the coming weeks, investors are likely craving some reassurances on economic policy in addition to profit gains. Each of the major indexes experienced a major selloff in the minutes leading up to the closing bell, while softness in the small- and mid-cap markets contributed the 2.3-to-1 edge held by decliners over advancing stocks. Hopeful for some positivity on the earnings front, the bulls will try to rebound after the Easter holiday. Stay tuned. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:15 PM EDT
Equities got off to a weak start earlier this morning, but have since firmed up somewhat. At just past noon in New York, the Dow Jones Industrial Average is ahead roughly seven points; the broader S&P 500 Index is up two points; and the NASDAQ is higher by 11 points. Market breadth shows a divided session, with winners about even with losers on the NYSE. The major equity groups are still mixed, with gains in the technology names and weakness in the energy stocks.
Meanwhile, there were a few economic news items reported earlier today. Of note, producer prices dipped slightly during the month of March, while the core reading remained unchanged. These figures were in line with expectations and suggest that inflation is not yet an issue. Elsewhere, the nation’s employment situation continues to show some progress. Initial jobless claims dipped to 234,000 for the week of April 8th, where analysts had expected claims to move higher. Finally, the University of Michigan’s consumer sentiment survey registered a preliminary reading of 98.0 for the month of April, which was a solid number.
Elsewhere, the first-quarter corporate reporting season has just begun. A few of the nation’s leading banks delivered their numbers over the past 24 hours. Specifically, shares of JPMorgan Chase (JPM – Free JPMorgan Stock Report) are trading slightly higher, in response to a solid report. However, Wells Fargo & Co. (WFC) stock is moving a bit lower, as investors were less impressed with that bank’s results.
Technically, the stock market has been a bit soft lately, and has been unable to move higher after stalling out in early March. The first-quarter earnings season is now in progress, and that may help buoy traders. However, with equity prices somewhat elevated, the news will probably have to be quite encouraging to make a major difference. – 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
Following back-to-back unprepossessing sessions on Wall Street to begin the new week, stocks got off to a similarly uninspiring start yesterday, with equities generally heading lower. On point, the Dow Jones Industrial Average, the Standard and Poor's 500 Index, and the tech-laden NASDAQ all were modestly weaker after the first half hour of trading. However, whereas on Tuesday, the small-cap Russell 2000 had run counter to the prevailing lower pattern, yesterday's opening saw that composite join the other indexes in the red.
Behind this early weakness was apprehension about the frayed international situation, most notably with regard to Syria, Russia, and North Korea. All things considered, however, the stock market's behavior has been reassuring, with the averages clearly holding their own in recent weeks. One reason for this resilience is the confidence being displayed by Wall Street's bulls on the eve of earnings reporting season, where expectations are that profits for the opening span will show about a 10% increase over last year.
In fact, given the fragile global backdrop and the elevated level of the market, we think that Corporate America will need to come through to keep this equilibrium in place. And our sense is that this will not be a problem. Meantime, though, stocks continued to meander lower as the early morning proceeded. But that weakness was neither deep nor prolonged. And in similar fashion to Tuesday, when the market had recovered from a serious early setback, stocks found some mid-morning support yesterday.
However, also unlike Tuesday, the mid-morning attempted comeback did not gather any momentum, and by late morning, the market was near session lows, with the Dow falling back by just over 100 points. But that pullback also did not gather much more momentum, and the market spent the rest of the morning and early afternoon locked in a fairly narrow trading range. It seems that worries about global issues are keeping stocks from gaining further traction. The promise of earnings season, meantime, is keeping a wholesale rout at bay.
The market then continued to go back and forth between modest and somewhat more substantial losses as the session wound down. Interestingly, unlike Tuesday when the small-cap sectors held their own and then some, yesterday saw the Russell 2000 tumble by well over a full percentage point. Breaking the session down further, we see that six of the 10 leading sectors fall on the day with major setbacks in the basic materials and industrial groups, while declining stocks led advancing issues on the NYSE by more than two to one.
At the close, and after staying in negative territory all session, the Dow ended off 59 points; the S&P 500 Index was lower by nine points; and the NASDAQ backed off 31 points. Moreover, both the S&P 500 and the Dow ended up below their 50-day moving averages, suggesting technical weakness is afoot. We think some catalyst will be needed to light a fire under the bulls, and our sense is that it will be earnings that will need to come through, as the other important variable, the international situation, is unlikely to brighten anytime soon.
Looking out at a new day now and the final trading session of the week with the Good Friday observance tomorrow, we see that stocks were generally mixed in Asia overnight, while the bourses are in the red thus far this morning in Europe on dollar concerns. Also of note, oil is unchanged; interest rates are moving higher as the dollar falls; and the U.S. futures are weaker. Finally, while the market is closed tomorrow, a trio of key reports will be issued, notably data on retail sales, consumer prices, and consumer sentiment. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
