After the Close
The stock market got off to a mixed start today, and then drifted lower through much of the afternoon. At the close of trading, the Dow Jones Industrial Average was off 41 points; the S&P 500 Index was down five points; and the NASDAQ was largely unchanged. Market breadth was slightly negative, as decliners outnumbered advancers on the NYSE. From a sector perspective, the healthcare and technology issues advanced, while the financials and consumer cyclical names retreated.
Traders were not likely too pleased with the economic news released earlier today. Of note, the advance estimate for first-quarter GDP showed the economy expanding at an annualized rate of 0.7%, where analysts had been looking for a much better figure. Soft consumer spending and vehicle sales played a role in the shortfall. Elsewhere, the University of Michigan’s consumer sentiment survey was finalized at 97.0 for the month of April, just a bit lower than had been anticipated. It should be noted, meanwhile, that sentiment is still running high, when compared to last year’s numbers. On a brighter note, according to the Chicago PMI, business conditions in the greater Chicago region held up quite well during the month of April.
Meanwhile, traders continue to digest the numerous first-quarter earnings reports coming out daily. In the technology space, reports from Alphabet (GOOG) and Amazon.com (AMZN) helped push those issues higher today. Investors were less pleased with the news from Starbucks (SBUX), as that stock traded lower.
Technically, equities have gotten a temporary lift from the latest batch of profit reports and possibly from the Trump Administration’s introduction of a corporate-friendly tax plan. However, it remains to be seen if the bulls will be able to sustain a successful buying campaign, especially as the earnings season starts to fade and the summer months approach. – 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 - 12:10 PM EDT
Most U.S. equities opened higher before turning modestly lower on Friday, the final day of what has otherwise been a notable rebound by the bulls. Buoyed by tax reform speculation and a mostly positive quarterly earnings season, the performance of the three major indexes had been solid thus far in the week. This morning’s downturns in the S&P 500 and Dow 30 likely reflects some end-of-the-week profit taking, as well as a reaction to the weak economic news from the Department of Commerce (see below). Market breadth favored the bears as we crossed into the afternoon, while each of the indexes occupied negative territory.
The Commerce Department’s first-quarter GDP update was underwhelming. The nation’s gross domestic product rose only 0.7% in the period, considerably lower than consensus expectation. Though growth in the housing and investment sectors delivered strong metrics, insufficient growth in the retail component was the main takeaway from this morning’s report. Still, traders are hopeful that this slow start will accelerate in the coming quarters, as has been the case in previous years.
Meanwhile, oil bounced back somewhat this morning. The upcoming meeting by OPEC is inspiring some renewed hope that the cartel can extend its six-month drilling accord past the June end date. Granted, given the commodity hit one-month lows during yesterday’s session, today’s $0.19 per-barrel increase is probably more reflective of investors taking advantage of lower prices than a sudden turnaround in sentiment. The energy sector is one of only three (out of ten) market sectors in positive territory this morning.
So, following the bearish tilt to the morning’s trading, we see that each of the indexes still remain within striking distance of their respective all-time highs. Earlier in the morning, actually, the tech-laden NASDAQ rode earnings-related strength from Alphabet (GOOG) and Amazon.com (AMZN) to reach a record level. Corporate earnings season will continue to hold most of the influence next week, when the bulls will look to extend recent momentum. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
After a pair of big back-to-back wins for the bulls on Monday and Tuesday on comforting first-round election news out of France to start the five-day span and solid improvement on the earnings front, and choppier activity during the middle day of the trading week, equities found early support yesterday. Once again, it was constructive news on the earnings front that set into motion the early gains, as well as expectations that a number of companies due to issue their metrics after the close would meet or exceed expectations.
Meanwhile, it was not earnings that helped to embolden traders early, as data issued before the start of the new day showed a smaller-than-forecast increase in orders for durable goods and a larger-than-expected total of new weekly jobless claims. But economic news, save for a few high-profile issuances, is not what the Street is focusing on at this point. Rather, it is the drumbeat of earnings releases and the news out of Washington. On the former side, the overall tenor is positive; the saga on the political front is more mixed.
Specifically, after stocks got a modest early bounce on Wednesday after release of the details of President Trump's plan to slash corporate taxes and slightly lower individual rates, the market settled in on worries that the inability of the two parties in Congress to reach agreement on a proposal to limit spending could bring a shutdown of the U.S. government tonight. Although we sense that some late deal will be reached, we also believe that this uncertainty is now having some impact on trading.
As to the market yesterday, following that initial buying flurry, there was an equal dose of profit taking during the latter stages of the morning. In all, Wall Street started the afternoon with the averages stuck in neutral, as the Dow Jones Industrial Average bounced above and below the 21,000 mark. The NASDAQ, which gave a more reassuring performance, held above 6,000 with ease, even securing some additional all-time records. Then, as the afternoon unfolded, stocks took a more positive turn, with the major averages all moving onto the plus side of the ledger.
Overall, the market continued to evidence a mixed-to-higher tone to it, buoyed by earnings but held in check by some selective profit taking. Individually, poor earnings results from some steel companies continue to pummel the basic materials groups, while lower oil prices have brought some pressure to bear on the energy sector. Thus, the major groups were tracking unevenly, even as the stock market in the aggregate was showing a few more gainers than decliners as the afternoon wore on.
Meanwhile, traders may also have been nervous ahead of the release, after the bell, of earnings from some major companies, including a couple of Dow components. Also, key economic metrics are out this morning and that served to worry some investors before yesterday's close. Finally, there are the last minute negotiations to avert a feared government shutdown later tonight. As noted, we expect such a breakdown to be avoided, though tensions between the parties remains as intense as ever.
The day drew to a close with the modest gains secured earlier in the day remaining largely intact, with the Dow, following some late selling, still managing to end matters ahead by a half dozen points. Small gains also were tallied by the S&P 400 and 500, while the NASDAQ, on strength in tech, managed to end a more formidable 24 points to the good, thereby establishing another record close. The NASDAQ led the way higher on optimism in the technology sector ahead of some pivotal after-the-close earnings issuances. The one casualty, meantime, was the small-cap Russell 2000, which dipped nominally.
Looking ahead to a new day, and across to Asia we see that stocks there were mixed overnight, while in Europe, the Continent's bourses are generally weaker so far this morning. Meantime, in other markets, oil is firming on hopes for an output cut extension, after falling yesterday and bond yields are higher after the GDP issuance (see below). Our futures are mixed, meantime, ahead of the open and the latest news on earnings, the political scene in Washington, and the economy.
Finally, in a metric just released, the Commerce Department reported that the nation's gross domestic product rose an uninspiring and well below consensus 0.7% in the first quarter. It was, in fact, the weakest performance for the January-through-March period in three years, as consumers notably slowed their spending. This poor showing continued the pattern of recent years in which the economy gets off to a slow start. Hopefully, there will be a rebound during the spring as there often is. This showing contrasts with growth of 2.1% in the fourth quarter of last year and forecast increase for the latest period of 1.2%. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
