After the Close
The U.S. stock market put in a somewhat directionless and mixed performance today. However, at the close of trading, the major averages managed to land in positive territory. The Dow Jones Industrial Average was ahead 39 points; the broader S&P 500 Index was up one point; and the NASDAQ was higher by four points. Nonetheless, market breadth suggested a divided session, with winners and losers about even on the NYSE. From a sector perspective, the energy and basic materials issues forged ahead, possibly helped by higher crude oil prices. In contrast, select consumer and financial names weighed on the market.
Today’s economic news was largely constructive. Specifically, the nation’s trade deficit narrowed to $43.6 billion for the month of February, which was an encouraging figure. In addition, factory orders rose 1.0% for the month of February, which was more or less in line with expectations. Tomorrow will be a busier day for reports. Of note, Automatic Data Processing (ADP) is slated to release its private sector employment figures for the month of March. The ISM Non-manufacturing Index for March is also due out. Finally, in the early afternoon, the FOMC will release the minutes from its latest meeting. Meanwhile, traders are likely awaiting some key economic news due out at the end of the week. Specifically, Friday morning the Government will deliver the nonfarm payroll report for March.
In the corporate arena, few major names delivered financial results today. However, the month of March is now over, and the first-quarter earnings season will soon be starting up.
Technically, even though the market has pulled back a bit over the past few weeks, there seems to be some support for stocks. Of note, we have seen limited bouts of selling, and sentiment remains relatively upbeat. Also, when the market has gotten off to a weak start, traders have often moved in to buy equities in the afternoon. This suggests that the bulls are still active in the market, and probably should not be counted out just yet. – 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
Following a lower day yesterday to start the new quarter, stocks opened to the downside this morning. But, the selling was limited, with the averages down just grudgingly to start the day. The averages then stayed that way through the first hour, before the Dow Jones Industrial Average, the weak link so far this year among the larger-cap indexes, edged into the plus column, as we began the second hour of trading. Meanwhile, nine of the 10 major equity groups were then in the red, with only basic materials showing any modest strength, while losing stocks held a three-to-two lead on advancing issues after the first hour.
It seems as though investors were exercising caution ahead of a late-week meeting between President Trump and China's President Xi Jinping. One sticking point in their prospective get together could be trade, as our country may be seeking to renegotiate trade pacts it deems to be unfair. In other news of note on international dealings, the morning saw the release of favorable global goods and services news, as our deficit declined in February from the bloated January levels, while factory orders rose by 1%. Also, after suggesting that tax reductions were next on the agenda, the Administration is now planning to revisit health care reform.
All of this was against the looming backdrop of first-quarter earnings season. That event will commence en masse over the next fortnight and then last for the remainder of the month. Expectations are strongly positive, with consensus estimates calling for about a 9% earnings increase, which, if realized, would be the strongest showing in more than half a decade. Forecasts of solid profit improvement this year, along with a better economy, and tax reform have been driving equity prices higher since the election. Now, the economy, fiscal change, and earnings will all have to deliver with valuations as high as they are.
Meanwhile, after this halting start, the market is pressing forward on selective fronts, with the Dow Jones Industrial Average leading the way, with a gain of better than 35 points as the morning concludes. The S&P 500 Index and the NASDAQ, however, are little changed; the S&P Mid-Cap 400 is a tad lower, while the Russell 2000, the principal small-cap benchmark, is edging higher. Still there are many more declining issues than gaining stocks, which could suggest that we may see a resumption of the prior weakness later on in the trading day.
Looking ahead, we think the ebb and flow of news out of Washington will continue to hold sway for the next week, or so, before the initial profit reports start to trickle in. That event, if upbeat expectations are realized, could give what has recently been looking like a tired stock market a needed second wind. For now, however, we may see some further backing and filling for a time. 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.
Before the Bell
Wall Street ended a solid first quarter on a slightly lower note this past Friday, but began the second three months slightly to the upside--at least through the first half hour. In fact, sentiment toward the stock market seemed to get an early lift when a report was issued showing an uptick in construction spending. That gauge rose to an 11-year high in February. However, when the Institute for Supply Management came out with its reading on manufacturing, showing a reasonable performance in March, but still a slight dip from February, stocks faltered.
To be sure, the damage was not all that much, initially. Indeed, after a brief several-minute selling flurry, which saw the Dow Jones Industrial Average sink about 30 points, some stability returned, as the data were perceived as fairly neutral. Thus, within minutes the Dow's loss had been pared and the NASDAQ had resumed its nominal climb. Helping the market at first was selective gains in technology and in telecom, where Dow component Verizon (VZ - Free Verizon Stock Report), a weak performer so far this year, was showing some welcome strength.
As to the nation’s economy, it will be a busy week, with surveys being issued on non-manufacturing activity, the international trade gap, and then on Friday, the Labor Department will issue its report on non-farm payrolls for March. Another solid gain in that category is the forecast, although consensus holds that the increase will be less than in February. Regarding the stock market, most of the large and small-cap indexes inched back into the red, albeit not materially so, as the first hour of trading ended, a sense of calm generally prevailed.
But that calm soon dissipated, and as the morning wound down, the sellers really entered the fray and at one point drove the Dow down by a little more than 100 points. It seemed as though the doings in Washington, the pending earnings season, the economic calendar and the drama that can bring, and concerns about elevated valuations were all playing a role in this morning selloff, which persisted into the lunch hour, with notable weakness in the financials and the energy stocks. In all, losing issues doubled up on winners on the NYSE.
That late-morning swoon proved to be the low point for the session, however, and the market soon began a slow climb back toward high ground. All told, the Dow managed to erase all of its losses, and around 3:00 PM (EDT) managed to tiptoe into the black for a spell. The S&P 500 Index and the NASDAQ, though, remained a little below the neutral line throughout, while the small cap Russell 2000 retained a large deficit on the day. As the day drew to a close, only the telecom group was in the black among the top ten equity categories.
As the final bell sounded, stocks closed lower, but not dramatically so, with the Dow shedding 13 points; the S&P giving back four points; and the NASDAQ falling 17 points. Losing stocks, meantime, held more than a four-to-three lead on gaining issues on the Big Board. The small-cap Russell 2000, meantime, was a disproportionately large casualty, losing well over a full percentage point. This setback in the market came in spite of the benign economic data issued in the morning and a drop in bond yields.
Looking out at the second business day of the month, we see that stocks were generally weaker in Asia overnight, while they are mixed-to-lower so far in Europe this morning. As to doings on our side of the Atlantic, bond yields are down a bit; oil is a touch higher; and our futures are showing early losses, as Wall Street hopes to rebound from a modestly softer beginning to the second quarter. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
