After The Close
The market started trading lower today, as a few lackluster earnings reports spooked investors. These included one from Google-parent Alphabet (GOOG), which reported a slowdown in top-line growth. However, solid results from Dow-components Pfizer (PFE – Free Pfizer Stock Report) and Merck (MRK – Free Merck Stock Report). Still, the Dow Jones Industrial Average fell by as many as 135 points in the early part of the session, and the other indices were lower in tandem. However, a few stories broke, including potential conclusion to U.S. trade talks with China and the President’s constructive talks with members of Congress on an infrastructure bill. Both caused sentiment to improve. This action drove the markets higher, reversing much of the early losses. Eventually, the Dow and S&P broke into the green in the final part of the session, though the NASDAQ remained lower. All told, the Dow closed higher by 39 points, the S&P 500 was up just three points, but the NASDAQ fell 54 points.
Additionally, market breadth was rather directionless, favoring neither advancers nor decliners by a large amount. Utilities stocks were among the best performers on the day, aided by reduced interest rates. On the other hand, communications equities were among the worst performers, hurt by the fall in price of Alphabet.
In commodity news, oil prices were higher today, as fighting in Venezuela raised concerns about future supply. Meantime, U.S. Treasury bond yields rose, as a flight to the safe-haven asset occurred. Too, the VIX Volatility Index climbed as demand for options protection increased.
Looking forward, all eyes will be on the Fed tomorrow, as it completes the two day FOMC meeting. It is currently expected to hold interest-rate policy constant but traders will likely be looking at the accompanying statement for any changes. In addition, a slew of economic data, including the ISM Manufacturing Index for April and the Energy Information Administration’s weekly report on oil inventories will affect the broader markets.
Too, earnings season will continue in full bloom, as a few large companies are slated to report tomorrow. Meantime, Dow-component Apple (AAPL –Free Apple Stock Report) released quarterly results after the closing bell today. This equity is often watched by Wall Street given its high weighting in the three major market indexes.
- John E. Seibert III
At the time of this article’s writing, the author held positions in Apple (AAPL).
Before The Bell
It proved to be a dull and largely directionless day on Wall Street yesterday, ahead of a very important week for economic releases, a whole host of profit reports, and the latest Federal Open Market Committee meeting and interest-rate decision. As to the stock market, Wall Street started the new day and week with small initial losses, which were soon overcome by a steady, but very limited upturn that lasted for much of the session. It was a most nervous advance, however, and would wilt into the close.
As to the market, the Dow Jones Industrial Average began the new week with nominal losses. The S&P 500 Index and the NASDAQ, each off of record closes last week and during yesterday's session, also edged lower in early dealings. But as we passed the first hour of trading, all three of these large-cap composites had maneuvered their way into the plus column, where they would continue for the remainder of the session. Still, this was a narrow advance and trading took place within a tight band throughout.
As to influences, there would, of course, be earnings, where the news to date has been reassuring. On point, the consensus expectation had been for about a 4% decline in the average corporate bottom line; to date, of the nearly 50% of the S&P 500 companies that have reported, the average company has posted a 1% advance. In addition there is the economy, where this week will see the issuance of data on consumer confidence (later this morning), ISM manufacturing (tomorrow), employment (Friday), and nonmanufacturing (also on Friday).
Getting back to the market, stocks continued their slow trek higher until the final minutes of trading, when some nervous profit taking ensued, with the Dow, which had been up 60 points, concluded matters ahead by 11 points. Gains of three and 15 points, respectively, were posted by the S&P 500 and the NASDAQ. So, it was just a nominally upbeat session to begin a major news week. Meanwhile, there is the Federal Reserve, which will gather this morning and conclude its two-day meeting tomorrow afternoon, where no interest rate change is expected.
In fact, our sense is that the Fed could be on hold for much of this year, with the next rate move perhaps coming in 2020, when a rate reduction would seem possible, especially if GDP growth slows. Finally, in news yesterday after the close Alphabet (GOOG), the parent of Google reported better than expected earnings, but came in short on the revenue line. The stock, which has been up sharply this year and rose again yesterday in regular hours, then fell notably in after-hours trading, in response to the revenue slowdown.
Now, looking out on a new day, we see that stocks were mixed to lower in Asia overnight; in Europe, the leading bourses are now moving downward, despite better-than-expected euro-zone GDP figures. Also, Treasury yields are edging downward and oil prices are climbing again. As to U.S. futures, the early read is mixed ahead of the Fed meeting and some key data on consumer confidence.
– Harvey S. Katz, CFA
