After The Bell
The stock market opened higher today, and managed to build on these gains for much of the session. At the close of trading, the Dow Jones Industrial Average was ahead 239 points; the broader S&P 500 Index was up 28 points; and the NASDAQ was higher by 115 points. Market breadth showed widespread buying today, as advancers easily outpaced decliners on the NYSE. Most of the major equity sectors moved higher, with leadership in the technology and healthcare names. On balance, the telecom stocks moved lower.
The economic news was supportive today. Specifically, initial jobless claims moved lower to 209,000 for the week of April 21st. This reading was one of the lowest we have seen in quite some time and suggests that the labor market is in good shape. Elsewhere, durable goods orders increased 2.6% in the month of March, which also surpassed expectations. Tomorrow we will get a look at the advance estimate for first-quarter GDP. The Chicago PMI for the month of April also will be released.
In the corporate arena, a number of widely followed companies delivered their results over the past 24 hours. These earnings reports probably helped lift sentiment on Wall Street. Specifically, shares of Facebook (FB), Visa (V – Free Visa Stock Report), and United Parcel Service (UPS) all traded higher today in response to these reports. Tomorrow, energy giants, Exxon Mobil (XOM – Free Exxon Stock Report) and Chevron (CVX – Free Chevron Stock Report), will weigh in with their numbers.
Technically, the stock market exhibited some strength today. It remains to be seen if the bulls can build on these gains in the coming days. Of note, the market has been quite volatile this year. Too often advances have been followed by declines, making it hard for the major market indexes to make any meaningful progress.
— 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
Concerns about rising interest rates, more so than the latest news on corporate earnings, appear to be front and center on Wall Street these days. To be sure, earnings are still critical in many cases, as major moves among high-profile large-cap stocks, such as 3M Company (MMM – Free 3M Company Stock Report) on Tuesday, would suggest. However, the stock market seems to be rising and falling even more in response to changes in the 10-year Treasury note. And, for the most part, that fixed-income vehicle's yield has been rising so far this week. Thus, stocks have been falling, with Tuesday's 425-point plunge in the Dow Jones Industrial Average indicative.
And things did not start out very well yesterday, as the Dow, under pressure from yet a further jump in the 10-year note's yield, to 3.02% this time, quickly fell to an early session loss of 200 points, tumbling further into correction territory, and descending to just about the lows on Tuesday. The other indexes also dropped, although some of the recently battered consumer non-cyclical stocks, such as the foods and the household products companies, rebounded somewhat from deeply oversold conditions. Overall, though, the market stayed lower and Treasury note yields held just above the critically important 3.00% mark.
All of this took place on a quiet day for economic news following a hectic two days early in the week in which we had received key data on sales of existing homes, transactions involving new properties, and a survey on consumer confidence. The fact that each of these reports was positive might have been used to bolster the bullish cause, except for the fact that strong economic data can lead to higher interest rates. And that is the last thing that Wall Street wants or needs at this time, especially as the Federal Reserve is set to meet next week. At this time, we do not expect any change in interest rates at that time.
As to economic news, tomorrow will bring the first look at opening-quarter GDP, with growth of 1.8% the consensus forecast. That would follow the fourth-quarter tally of 2.9%. But the opening period tends to be seasonally weak, and growth is likely to step up in the current three months to near 3.0%. Meanwhile, after the early drop in the market, the losses started to abate as the morning progressed, and as we reached the 90-minute mark of the trading day, the Dow's deficit had nearly been wiped out in some bargain hunting, even as Treasury note yields ticked up just past 3.02%.
However, that comeback could not gather additional momentum, and as the morning concluded, the market was easing off once again, with interest rates climbing further. Rates then hit 3.03% and the market sold off anew. But that second downdraft was brief, and as we approached the final two hours of the trading session, the market regained some traction, lifting the Dow to a mid-afternoon gain just north of 65 points. Then, after a short-lived pause that erased the green arrows on the Dow, that composite regrouped and headed higher once more, this time with even a bit more vigor, rising 120 points as we entered the final hour.
But that comeback could not fully sustain itself, as there was some giveback as the session concluded. In all, we saw a mixed close, with the Dow up 60 points; the S&P 500 grudgingly higher, but the NASDAQ and the small-cap Russell 2000 off modestly. The mixed tone also was apparent in the 10 major equity sectors, with six of them gaining, but technology leading the way lower. Also, both the Big Board and the NASDAQ ended matters with more stocks down than up, with the final tally being on the order of a plurality of three to two.
Looking out to the penultimate session of the week, we see that shares in Asia were lower in overnight trading, while in Europe, the early read is positive. In other markets, oil is gaining again and yields on the 10-year Treasury note, which ended matters at 3.02%, are now passing hands at 3.01%. All of this is pushing the equity futures to early gains, setting up a modestly higher opening when trading resumes at 9:30 AM (EDT) this morning. From there, our sense is that earnings data will play some role in the day's activity, but the major impetus will come from the latest moves in Treasury note yields. Stay tuned.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
