After the Close
Equities put in a mixed, but selectively constructive, session today, as we embarked on a new week. At the end of trading, the Dow Jones Industrial Average was down 27 points; the broader S&P 500 Index was up four points; and the NASDAQ was higher by 44 points. Many stocks managed to forge ahead, as winners slightly outpaced losers on the NYSE. From a sector perspective, the technology and financial issues displayed leadership, while the utility names retreated.
Meanwhile, traders shrugged off a number of lackluster economic items released earlier this morning. Specifically, personal incomes rose 0.2% (while spending remained unchanged) during the month of March. These figures were a bit below expectations. Meanwhile, construction spending dipped 0.2% in March, where analysts had been looking for a slight increase. Further, the ISM Manufacturing Index came in at 54.8 in April. This figure was down from the March showing of 57.2, and also fell short of the consensus forecast for the month. Tomorrow will be a light day for economic news. However, the FOMC will start its two-day meeting, which culminates with an interest-rate decision on Wednesday afternoon. Given the preoccupation with monetary policy lately, traders will likely be watching closely for any developments.
Elsewhere, the first-quarter corporate reporting season is still underway. This morning we heard from Loews Corp. (L). Of note, the holding company’s stock was up for much of the day (but closed lower) in response to a better-than-anticipated release. Things did not go too well for DISH Network (DISH), though. That issue lost ground in response to a lackluster report. Meanwhile, the news should pick up quite a bit, as many large names, including Apple (AAPL – Free Apple Stock Report), are due to weigh in with their numbers in the days ahead.
Technically, the stock market seems to be displaying a bit of resilience. Some better-than-anticipated earnings reports may be helping sentiment. The political scene at home and abroad may also be playing a role. – 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
The U.S. equity markets opened the day to the upside and largely continued their winning ways as the morning session wore on. While most of the major global markets were closed today for the May 1st holiday, traders on our shores have had a number of reports to keep them busy.
Investors breathed a sigh of relief after the House and Senate agreed on $1.1 trillion spending bill that would side-step a shut-down and keep the government running through September. Meanwhile, the Institute for Supply Management reported that its manufacturing index declined to 54.8 in April, which was slightly below expectations. (A reading above 50 indicates expansion.) In March, the index had reached its highest level in nearly three years. China also reported a decline in manufacturing activity last month.
Elsewhere, oil prices lost some ground as U.S. producers increased the number of rigs in operation for a 15th straight week, marking the highest level in more than two years. Putting further pressure on the commodity, OPEC member Libya resumed production at its largest oil field. Light sweet crude futures were down about 60 cents a barrel, or a little over one percent.
As we pass the noon hour of trading in New York, the major U.S. indexes were up by varying degrees. The tech heavy NASDAQ, after touching on a new intraday high earlier this morning, is leading the pack with a gain of 35 points, or a little over a percent. The S&P 500 is trailing a bit behind, rising six points, or about a quarter percent. Lastly, the Dow Jones Industrial average was also up by six points, a fraction above the unchanged mark. In terms of sector performance, technology, consumer cyclicals, and financials have been the biggest gainers, while utilities, telecommunications, and consumer noncyclicals were showing modest losses.
Looking ahead, while earnings season remains in full swing, the market’s attention will also focus on the Fed as it holds its Open Market Committee meeting this week, and then Friday we get the U.S. monthly employment report. – Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before the Bell
The most recent five-day stretch of trading on Wall Street was a good one for those long equities. For the week, the Dow Jones Industrial Average, the tech-heavy NASDAQ, and the broader S&P 500 Index climbed 1.9%, 2.3%, and 1.5%, respectively. There was a confluence of factors that fueled the selective buying. Early in the week, the bulls were emboldened by growing sentiment that the previous weekend’s Presidential election results in France and the subsequent runoff between two candidates this coming Sunday would result in the election of centrist candidate Emmanuel Macron, which would result in France pledging its commitment to the European Union. An opposite outcome would likely roil the world’s financial markets, maybe to a greater extent than Brexit initially did last June. Also helping stocks was some mixed (at least among the blue-chip companies), but mostly constructive earnings news.
However, the buying did not persist through the end of the week. Indeed, on Friday, the major averages started the session in mixed fashion, before eventually succumbing to some profit taking as the day wore on. The primary impetus behind the modest pullback was a weaker-than-expected report on first-quarter GDP growth. The first estimate for GDP showed that the nation’s economy expanded by just 0.7% in the first quarter. That figure fell short of the consensus estimate of 1.2% and was not the start Wall Street was expecting for 2017. Not surprisingly, some of the economically sensitive sectors were among the weak spots on the final day of trading last week, with the biggest laggards being the financial, industrial, and consumer cyclical groups.
The news from Corporate America continues to draw the lion’s share of the investment community’s attention these days. Last Friday was no exception, as investors received earnings news from four Dow-30 companies: Exxon Mobil (XOM), Chevron (CVX), Microsoft (MSFT), and Intel (INTC). The latter two reports came after the close of trading on Thursday afternoon. For the most part, the news from these four industry heavyweights was positive and provided some support for the market in a down tape. This week, we will get some more important results from Corporate America, including the latest quarterly reports from drug making giants Pfizer (PFE) and Merck & Co. (MRK) tomorrow morning. The investment community also will be eagerly awaiting the latest earning figures from technology behemoths Apple (AAPL)—after the close of trading tomorrow afternoon—and Facebook (FB) on Wednesday morning.
The news from the business beat also heats up this week, with a number of important reports on the schedule, including data on manufacturing (10:00 A.M. EDT today) and nonmanufacturing (Wednesday) activity and the latest employment and unemployment figures from the Labor Department on Friday. The nonfarm payroll data and the Federal Reserve’s two-day FOMC meeting, which commences tomorrow morning, have the potential to be game changers for the U.S. equity market. The investment community is looking for more clues as to how the central bank will proceed with regard to monetary policy over the remainder of 2017. Further, Fed Chair Janet Yellen is scheduled to deliver prepared remarks to Congress on Friday morning, which is expected will be closely followed by Wall Street. Federal Reserve District Presidents James Bullard, John Williams, and Stanley Fischer also are scheduled to make speeches on monetary policy this Friday. Just moments ago, the Commerce Department released its latest figures on personal and spending. Specifically, personal income increased $40.0 billion (+0.2%) in March, while personal consumption expenditures increased $5.7 billion (less than 0.1%). The report, which showed personal incomes growth moderated on a sequential basis and only a minimal increase in spending for the second consecutive month, was a bit disappointing. However, with all the economic data still to come this week, we don’t expect this report to have a big impact on trading today.
Meanwhile, we learned yesterday evening that Congressional leaders have reached a deal on a spending package to fund the U.S. government through the end of September, avoiding a government shutdown later this week. Congress is expected to vote on the roughly $1 trillion package sometime this week. The bipartisan agreement includes policy victories for Democrats, whose votes will be necessary to pass the measure in the Senate, as well as $12.5 billion in new military spending and $1.5 billion more for border security requested by Republican leaders in Congress. The accord removes an issue that had the potential to roil the markets later this week.
With less than an hour to go before the commencement of trading stateside, the equity futures are indicating some buying when the U.S. equity market opens. Overnight, the trading was mixed in Asia, while the major European bourses are slightly in the red as trading moves into the second half on the Continent. As to these shores, the initial indications are positive for those long stocks, but as noted above there are numerous variables in play in the coming days that will probably make it a busy and eventful week for those on Wall Street. In our opinion, the Fed meeting and the job market data and outlook are most likely to determine which way the market heads over the next five-day stretch of trading. Stay tuned. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
