After the Close
The equity market put in a somewhat directionless performance today. At the close of trading, the Dow Jones Industrial Average and the S&P 500 showed only modest gains, while the NASDAQ managed to advance 24 points. Market breadth suggested a mixed quality to today’s trading, with advancers about even with decliners on the NYSE. The major stock sectors were divided, as sizable losses in the energy and basic materials issues offset gains in the healthcare and technology names.
Meanwhile, traders received a batch of lackluster economic releases this morning. Of note, durable goods orders increased 0.7% in March, while analysts had been looking for a slightly stronger figure. Further, initial jobless claims rose to 257,000 during the week of April 22nd, where the consensus forecast had called for a slight decline. Finally, pending home sales dipped 0.8% in the month of March, after increasing in February. Tomorrow, the advance estimate for first-quarter GDP will be issued before the market opens.
Elsewhere, the first-quarter earnings season continues to dominate the headlines. We recently heard from Under Armour (UAA). That issue was up after the athletic apparel maker posted encouraging results. After the market closes today, we will hear from quite a few high-profile names, including Alphabet (GOOG), Microsoft (MSFT – Free Microsoft Stock Report), and Amazon.com (AMZN).
Technically, stocks have firmed up a bit lately. But it remains to be seen if the bulls can keep their buying campaign intact. Corporate reports, as well as the situation in Washington, will likely be watched closely by traders in the weeks ahead. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 11:40 AM EDT
Stocks opened modestly to the upside this morning following stellar performances to start the week on Monday and Tuesday and a late fade yesterday, which left the equity market mixed at the close. The issues of note today are again earnings, with a succession of high-profile names set to report after the close, led by Intel (INTC - Free Intel Stock Report), Microsoft (MSFT - Free Microsoft Stock Report), and Starbucks (SBUX), and the comings and goings in Washington (where a government shutdown is still a possibility for late tomorrow if a budget accord cannot be reached).
Meantime, most of the key averages are now within striking distance of additional all-time highs, after the NASDAQ hit a peak in early dealings yesterday. Of course, there also is the economy, where tomorrow, the government will issue its advance report on first-quarter gross domestic product. Expectations are that growth reached, or topped, 2%. And we never are far removed from international events, which have exerted a positive influence so far this week, as the voters in France seem likely to elect a centrist candidate as President early next month.
But the big item of note remains earnings, where most companies reporting their metrics thus far have exceeded expectations. To be sure, there have been some high-profile profit and revenue misses. Overall, though, the news has been quite good, which is why the bull market has persisted with nary a hiccup this year. As for Washington, the release earlier this week of the outlines for a tax reform measure has lit an additional fire under the bulls. Now, the test will come when passage is sought. Also, there is the matter of health care to solve, where the Republicans seem to be moving closer to a new bill.
As for the early action this morning, stocks were helped by some constructive bottom-line metrics, especially from retailer Under Armour (UAA), which posted a smaller-than-forecast loss. That issue was ahead by some 10% early on. Conversely, a more-than-2% drop in crude prices weighed on the energy group. Finally, on the economic front, in reports issued this morning, the Labor Department reported a bigger jump in new jobless claims than expected, while orders for durable goods rose less than forecast in the latest month.
However, as the morning progressed toward its conclusion, the early spurt could not be sustained, and as we moved past the 11:00 hour, the Dow and the S&P 500 Index edged into the red, along with a number of the key groups. On point, the recently weaker telecom stocks floundered anew, while a few tech issues faltered as well, although the NASDAQ held higher for the time being. On the whole, the market was more mixed than not, with the basic materials and energy groups under pressure, but with a near standoff between gaining and losing stocks.
Thus, it would figure to be a tug of war into the close, with the bears perhaps likely to hold the final edge as profit taking, now long overdue, possibly sets in. Stay tuned. – Harvey S. Katz
At the time of this article's writing the author had positions in INTC.
Before the Bell
Following stirring back-to-back wins on Monday and Tuesday of this week for the resurgent bulls, what would Wall Street do for an encore seemed to be the great unknown yesterday morning as trading commenced. And the early answer was that the stock market moved ahead again, but without the fanfare of the first two trading days of the week. At that time, equities received a boost from the first round of the Presidential election in France on Monday; and then on Tuesday Wall Street received a lift from some strong earnings releases, especially by industrial giant Caterpillar (CAT - Free Caterpillar Stock Report).
Yesterday, however, the early strength was not provided by France or by earnings; in fact, there were actually some poor metrics, led by steelmaking giant U.S. Steel (X), which tumbled after missing on the top and bottom lines in the first quarter, amid concerns that it may not be making the investments in its facilities needed to make key competitive strides going forward. Rather, the gains, which were modest in the morning, were secured on hopes that the advertised tax reform measures to be advanced by the Trump Administration would meet their ambitious headlines.
That said, the early incremental progress increased as noon arrived, and the Dow Jones Industrial Average, which gained nearly 450 points combined on Monday and Tuesday was up another 60 points, or so, at that time. The S&P 500 Index also tracked higher, but the NASDAQ was no better than flat for a time. Still, there was a higher bias to the day's trading as the bullish grip on the market again was proving difficult to break as the afternoon evolved. In fact, it looked to be a so-called three-peat was ahead for the bulls at that point. But that was not to be the case.
Still, stocks remained higher into the middle of the afternoon, with the NASDAQ moving back into positive territory, while the Dow held fast to gains of modest proportions. Leading the way on this third day of market improvement was the small-cap Russell 2000 Index, which was ahead almost a percentage point at that time. It would seem as though expectations are sky high. Specifically, the assumption is that France's election will result in a more centrist candidate coming to power in the concluding round of voting, that earnings will continue to advance, and that tax reform will become a reality.
So, the market remained securely in the black as the afternoon progressed, with the Dow approaching record high ground, while the NASDAQ continued to make all-time highs. As to the tax reform measure, it contains a reduction in the corporate rate from 35% to 15%, a cut in the top individual tax rate from 39.6% to 35% and a narrowing of the deductions. Expectations for the lower corporate rates, in particular, have been a boon for the market since the November election. Anything short of a major overhaul of the tax structure could, thus, invite some selling.
As the session concluded, though, there was some selling, but not enough to drive stocks sharply lower on the day, just too gently to put the Dow and the S&P 500 in the red. Looking at the day's final action, there was something of a comeback by the heretofore ailing telecom group, notably shares of Verizon (VZ - Free Verizon Stock Report), which had faltered in recent sessions, but yesterday came back, with the generous-yielding issues rising 1.4%. Gains also were registered by other out-of-favor stocks. All told, at the close, narrow losses were posted by the Dow and S&P 500; a flattish performance was in place on the NASDAQ, but a moderate uptick remained on the small-cap Russell 2000, while the NYSE still had more gainers than losers.
Looking ahead to the trading this morning, we see that the stocks were mostly higher in Asia overnight, while on the Continent, the European bourses are moving lower so far this morning. Also of note, bond yields are off a bit; oil prices are down on oversupply concerns; and U.S. equity futures are trending slightly higher at this hour. As for the day ahead, earnings and taxes will head the list of variables in the trading pits, with a number of high-profile companies on the reporting docket both before the market opens and after the closing bell. Stay tuned. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
