After The Close
The stock market moved notably lower today, as a mixed batch of corporate profit reports ignited concerns about the health of the global economy. Further, many traders have been watching anxiously, as the yield on the 10-year Treasury note has worked its way up to the 3% mark. At the close of trading, The Dow Jones Industrial Average was down 425 points; the broader S&P 500 Index was off 36 points; and the NASDAQ was lower by 121 points. Market breadth was clearly negative, with losers ahead of winners by a wide margin on the NYSE. Most of the major equity sectors fell sharply, with steep losses the industrial and technology issues. In contrast, the telecom and utility names managed to buck the downtrend.
In economic news, new home sales came in at an annualized rate of 694,000 units during the month of March, which was a solid reading. Further, the Conference Board’s Consumer Confidence Index came in at 128.7 for the month of April, which was higher than had been anticipated. Tomorrow will be a light day for economic news. However, for traders watching the energy patch, the EIA will release the latest weekly crude oil inventory numbers.
In the corporate arena, traders were not pleased with the numerous reports issued over the past 24 hours. Specifically, shares of Alphabet (GOOG), 3M (MMM – Free 3M Stock Report), Lockheed Martin (LMT), and Caterpillar (CAT – Free Caterpillar Stock Report) all traded lower today, suggesting traders were left hoping for better news. Tomorrow, many more companies, including Facebook (FB) and Boeing (BA – Free Boeing Stock Report), will weigh in with their numbers.
Technically, the stock market is putting in a weak performance, as we finish the month of April. Today’s selling positions the S&P 500 Index just above its 200-day moving average, located at the 2,610 mark. Clearly, the market has been range-bound for a while, this earnings season has not provided the much needed boost.
— Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
2:10 PM EDT
Corporate earnings, which had been a welcome prop for the bulls in recent days, as most companies had been easily topping their first-quarter expectations, are suddenly less of a positive. And this disappointment, which is increasingly evident in market action today, is really hitting the leading averages as the session moves into its latter stages.
On point, the Dow Jones Industrial Average, which meandered in and out of the black yesterday before finally closing with nominal losses, started the current session sharply to the upside, as the blue-chip composite quickly raced out to a 131-point gain. But the bulls could not hold that advantage for very long. Indeed, as the morning wound down, there was a rethinking of the latest profit results, and some consequent sizable reversals in the stocks of individual companies. All of gave the bears an unexpected lift.
And as the rally fizzled and the selling intensified, a sizable loss has resulted. In all, the Dow is now down more than 500 points, with notable losses in the industrials, the basic materials, and the technology stocks. The problem is that expectations have been so high that the slightest disappointments have been met with furious selling. Up until now, most selloffs have been countered by buying in stocks that have surpassed expectations.
However, that is no longer the case. To be sure, it is not just the Dow that is suffering. In fact, we also are seeing sharp setbacks in the NASDAQ (now off 135 points) and the S&P 500 (down 43 points). But the largest casualty remains the Dow, which is seeing particular weakness in several industrial companies that issued their statements today. In all, the Dow is now back in correction territory with this afternoon's sharp drop.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Following a deeply bearish session on Friday, in which the Dow Jones Industrial Average plummeted by 202 points, and then a setback yesterday morning in Asia, and a modest push higher in Europe, stocks over here started the latest week on a mixed note, with the Dow slightly weaker, while the S&P 500 Index and the NASDAQ both tracked slightly higher. The stock market would then spend the rest of the morning alternating between moderately positive and modestly negative readings, with earnings generally playing a role.
Meanwhile, the back and forth action would persist, though most of the first half of the session saw more plus readings in the major large-cap composites than negative ones. As has been the case recently, the economy was taking a back seat to earnings, with most of the companies reporting results still beating expectations. That has been a nice prop for a stock market that has been under some pressure from political and international headwinds. However, a new variable has now entered the picture and that is somewhat disturbing to the bulls.
Specifically, interest rates are climbing, most notably on the 10-year Treasury note. On point, after climbing to just past 2.95% late last week, the yield on that key fixed-income instrument pushed up to 2.998% yesterday morning. That ascent kept a lid on stocks, and engendered some fears about how the Street would react should that rate climb past 3.00%. But even at 2.98%, which is where the note spent the early afternoon, that return was the highest since January 2014.
This standoff between the bulls and the bears persisted through the early afternoon, as an uneasy wait for rates to finally ascend 3.00% continued. Then, as we moved into the middle of the afternoon, a selling squall developed sending the Dow to a session-worst decline of 135 points. The NASDAQ, too, hit the skids, falling some 50 points, to just below 7,100. But that setback would not last, and as we moved into and through the final hour of trading, the market steadied and cut deeply into those afternoon losses.
What likely helped was a late dip in note yields back to 2.98% on the 10-year Treasury, from the cusp of 3.00%. The late comeback enabled the market to erase much its afternoon losses, with the Dow finishing off just 14 points. the NASDAQ's loss was an equally tame 17 points. All told, half of the top 10 equity sectors faltered on the way, with the basic materials group leading the way lower, while losing stocks held about a 16-to-13 lead on issues that were falling in value. So, while this was the fourth day in a row the Dow fell, the setback was quite mild.
Looking out at a new day now, we see that stocks in Asia were trading higher in overnight action, while the principal bourses in Europe are pushing nominally forward at this hour. Elsewhere, oil prices are gaining once more and yields on the 10-year Treasury note, which ended matters at 2.98% in trading yesterday, are now passing hands at 2.96%. As to our market, following yesterday's contained setback, the early read on our equity futures is positive, suggesting a notably better opening when trading resumes later this morning, chiefly on those lower Treasury yields.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
