After The Close
The stock market traded higher this morning, but weakened considerably in the afternoon. The selling may have been due to profit taking, as well as some concerns about the Federal Reserve’s course of action. At the end of trading, the Dow Jones Industrial Average was down 163 points; the S&P 500 Index was off 22 points; and the NASDAQ was lower by 46 points. Market breadth showed a negative bias to today’s session, as losers outnumbered winners on the NYSE. Basic materials issues were quite weak, offsetting some strength in the consumer area.
On the economic front, there were a few report issued today. According to Automatic Data Processing (ADP), there were 275,000 jobs added to the private sector in the month of April. This showing was far better than analysts had anticipated, and may have some traders wondering if the economy might be starting to expand too fast. We will get a better look at the employment situation on Friday morning when the government releases the April nonfarm payrolls numbers. Elsewhere, in the afternoon the FOMC wrapped its two-day meeting and announced that it would leave interest rates unchanged. The central bank noted that the economy was doing nicely, and this may have dashed some traders’ hopes that the Fed might be willing to adopt a more accommodative stance.
In the corporate arena, the first-quarter earnings season is in full swing. Yesterday afternoon, we heard from Apple (AAPL – Free Apple Stock Report) and an upbeat report helped lift that stock. Investors were pleased to see the technology giant diversifying its business and making further progress in China. Tomorrow, we will hear from Qualcomm (QCOM), another widely held technology name.
Technically, the stock market has had a stellar run so far this year. However, it seems additional gains may be getting harder to come by at this point.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
A revenue miss at Alphabet (GOOG), the parent of Google got the stock market off to a shaky start yesterday morning--especially the NASDAQ, where Google is domiciled. On point, even as the Dow Jones Industrial average treaded water during the first half hour of trading, the NASDAQ, under pressure from Alphabet stock, fell more than 50 points. That issue, which has been a strong performer this year and had helped the NASDAQ to a series of record closing highs, fell back some 100 points, or nearly 8%. Then as we passed the half hour mark of trading, the market took a further downward tilt as the Dow went negative.
However, it seemingly was not the economy that pushed the Dow modestly into negative territory, as a survey issued some 30 minutes into the trading session showed that the Conference Board's Consumer Confidence Index had increased to a strong reading of 129.2 in April. That was up from 124.2 in March. Even with this solid recovery last month, the Index remains below the levels secured last fall. However, this was a solid reading and suggests that the business expansion has further to go. At the same time, data released in the morning affirmed that pending home sales had risen 3.8% in March, which was above expectations.
Still, the market continued to trend lower, with the Dow falling by some 35 points as the session neared an hour in duration and the NASDAQ dropped 60 points, as Alphabet traded even lower and was joined by Apple (AAPL – Free Apple Stock Report) on the downside, as the latter's holders awaited its quarterly issuance. The Dow then fell sharply into the midday hour, dropping to a session-worst decline of 135 points. But as has been the case often so far this year, that mid-course descent quickly ended and a gradual recovery took hold, which by 2:00PM (EDT) that composite was back in the black.
However, the sharp drop in Alphabet continued, with that issue weighing down the NASDAQ, which continued lower by between 50 and 70 points for much of the afternoon. As for GOOG shares, they were off by more than 100 points, or better than 8%. Apple stock also was weaker ahead of its earnings report, but much more modestly. The stock market, after its recent run to record high ground by the S&P 500 and the NASDAQ is now overbought, and this prompted some of the profit taking. Then, as we moved into the final hour of trading, the Dow strengthened anew for a spell.
The market then would spend the final hour with little further change, with the Dow clinging to a small gain for much of the time and with the NASDAQ retaining a substantial loss. Investors moved into the close, worried about earnings for Apple, this morning's ISM manufacturing report (due out at 10:00, EDT), and Friday's data on April non-farm payrolls and the unemployment rate, and that day's scheduled issuance on ISM non-manufacturing activity. Additional earnings reports due out over the next few days on a host of larger companies also was keeping optimism under wraps.
As the final bell sounded, the Dow, with a modest last-minute spurt, rose 39 points and the S&P 500 Index tacked on three points, after having been lower for much of the day. However, the NASDAQ, weighed down by GOOG shares, tumbled 66 points, with that issue alone giving back 99 points. Helping the market during the second half of the trading day were hopes for an infrastructure spending deal in Congress and a trade agreement with China. Overall, though, it was a ho-hum day. Then, after the close, Apple came in with quarterly results that beat expectations and the stock rallied in afterhours trading.
Looking out at a new day now, we see that stocks were mostly higher in Asia overnight and on the Continent the major equity bourses are moving upward, as well, as they await the FOMC meeting's outcome. Also, Treasury yields, off yesterday, are nudging lower in early dealings this morning and oil prices, which gained late yesterday, are now falling on bloated supplies. Finally, after the Apple report and ahead of the critical manufacturing issuance later this morning and the Fed meeting this afternoon, the U.S. equity futures are now gaining nicely.
– Harvey S. Katz, CFA
