After the Close
Stocks traded lower this morning, recovered and moved higher in the early afternoon, but softened again late in the session. At the close of trading, the major averages were all more or less back to the neutral line, or slightly below. Market breadth was mixed, with winners roughly even with losers on the NYSE. The major market sectors were divided, as moderate gains in the healthcare and non-cyclical consumer stocks were offset by losses in the financials and in the high-yielding utility issues.
Meanwhile, the nation’s employment situation was in the spotlight this morning. Specifically, nonfarm payrolls increased by 98,000 in the month of month of March. Economists had been looking for a much higher figure. This showing also stood in stark contrast to last month’s figure, which came in at 219,000. On a positive note, the headline unemployment rate dipped to 4.5% for the month of March, from 4.7% in February. But part of this drop reflected fewer people in the workforce. Traders did not have much of a reaction to this month’s somewhat puzzling issuance, and it is not clear how the recent figures will be interpreted by the Federal Reserve, which has maintained that it may well implement a series of interest rate hikes in the months ahead.
Meantime, traders were probably also distracted by some destabilizing political events taking place across the globe. Specifically, the U.S. armed forces recently launched an attack on a target in Syria, in direct response to that country’s willingness to use chemical weapons. Furthermore, the Trump Administration is in meetings with China’s leadership, where North Korea will likely be a topic of discussion. In the stock market, shares of defense companies moved higher today. In commodities, the price of crude oil was a bit volatile today, possibly on regional supply concerns.
In the corporate arena, we heard from few companies today. However, that will soon change, as the first-quarter reporting season will commence in the next week or so.
Technically, after pulling back for a time in March, the S&P 500 Index seems to have found some support around its 50-day moving average (located at roughly 2,346). The upcoming first-quarter earnings season will likely be closely watched by traders, as they look for direction. – 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 - 12:15 PM EDT
U.S. stocks were largely directionless on Friday morning, as traders parsed through the monthly jobs report and reacted to news that the United States had bombed Syria overnight. The major indexes climbed higher at the bell, before dropping back by 10:00 A.M. Since then, sentiment has stabilized, as each grouping pared some of their respective losses. The even split between advancers and declining shares should not mask what has otherwise been an active morning on the newswire.
Following Wednesday’s update by Automatic Data Processing (ADP), which revealed the private sector had added an impressive 285,000 jobs, sentiment was understandably high for today’s government release. However, before the market opened, the U.S. Department of Labor reported that the economy added only 98,000 new jobs in March, barely over half of what was expected. That the figures from January and February were revised downward did not help market values early on. But the impact of inclement weather cannot be understated, with retail struggling the most in March. The unemployment rate did tick lower, but part of that decrease is likely more due to fewer people in the workforce than some broad-based acceleration of hiring. Alas, after some choppiness in the opening hour, traders appear to be taking the miss in stride.
Halfway through his two-day meeting with China’s President Xi Jinping, President Trump assured the public that the United States would undertake action against North Korea if the eastern power did not. This injected some uncertainty into the market. Then, last night, more-than 50 Tomahawk missiles were deployed toward Syria in a direct response to that government’s actions against its own civilians earlier in the week. This has compelled some traders to wonder whether surprise military engagements like this could potentially delay important economic initiatives in the near future.
Still, there were pockets of growth in the wake of these geopolitical developments. Aerospace and defense industrial equities have enjoyed a solid run up today, as has U.S. crude oil. The per-barrel price bounced higher as the attack on Syria is expected to increase demand for domestic oil. Meanwhile, some rotational trading has seen the telecom sector bounce back somewhat after slipping on Thursday.
So, with a half day left in trading, we see the bulls possibly mounting a midday rally, with the Dow holding onto a modest gain at the noon hour. Investors will be keeping an eye on the Trump/Xi meeting, as well as additional updates regarding Syria, as they determine their positions to end the week. – Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before the Bell
Following a dramatic late selloff on Wednesday, which fully reversed a near 200-point surge in the Dow Jones Industrial Average in early dealings, the stock market got off to an uninspiring start yesterday. The prior session's reversal of some 250 points from peak to late-day trough, was brought about principally by the mid-afternoon release of the minutes from the Federal Reserve's last FOMC meeting in mid-March. The minutes essentially said the Fed would soon start to reduce the bank's balance sheet, which includes assets purchased during and after the 2007-2009 recession and financial-sector meltdown.
The minutes additionally maintained that stock prices looked high relative to most valuation measures. The minutes also raised the possibility of an equity market correction at some time. In addition to that sobering release, comments attributed to House Speaker Paul Ryan on the uncertain road ahead for tax reform shook the Street's optimism. Those positive feelings had been fueled by an upbeat release early in the day on private-sector job creation from Automatic Data Processing (ADP). That company reported that such jobs had surged by 285,000 in March--well above expectations.
The ADP data raised expectations for the much more closely tracked government report on non-farm payrolls, which was released moments ago (see below). So, stocks rallied early and sold off thereafter. As to yesterday's performance, equities went up and down initially, essentially going nowhere in the first hour of trading. However, the market sought to stiffen its resolve, and stocks began to go higher as the midday approached, with the Dow rising nearly 100 points in early afternoon. However, the strength was mostly seen in the S&P Mid-Cap 400 and the small-cap Russell 2000, which surged by upwards of 1% each.
The market continued along its higher path into the afternoon, as Wall Street turned its attention to a high-profile meeting between President Trump and China's President Xi Jinping. The two-day get together is taking place at Mr. Trump's residence in Florida. The two leaders are expected to discuss trade relations and North Korea. The market is watching this gathering closely given the harsh rhetoric at times towards China's trade policies. Meanwhile, yesterday's midday uptick came after the largest intraday reversal in the Dow and the S&P 500 Index in 14 months.
Stocks then lost their momentum as the afternoon wound down, with the Dow and the NASDAQ especially weakening. The pullback, which was less dramatic than on Wednesday, was driven primarily by comments from the White House in which the President said that he is willing to act alone on North Korea if China does not get involved. Those words came as China's President is meeting with Mr. Trump. The President also pledged to seek the ouster of Bashar Assad from Syria. Nervousness ahead of the just-issued jobs report from Washington also rattled investors near the close, with the market remaining high, but just modestly so on the day.
As to that report, the U.S. Labor Department reported that the nation added just 98,000 payrolls in March. That was well below the projected increase for the month of 180,000 jobs. However, the unemployment rate came in at 4.5%, which was better than forecast. The equity futures, off slightly, before the release, then tumbled on the poor jobs gain. So, a lower open seems ahead for Wall Street in less than an hour from now. In other moves, stocks in Asia drifted higher overnight, after the U.S. fired off missiles on Syria, while in Europe, the bourses headed lower in early dealings following the air strikes. Also, oil prices are higher on the global news, while yields on U.S. Treasury issues are tumbling on the weak employment report. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
