After the Close
Investors at midweek largely shrugged off the latest drama out of Washington, and stocks traded in a fairly narrow range for most of the day. At the closing bell, the major averages were mixed, with the Dow Jones Industrial Average falling 33 points; but the NASDAQ tacked on nine points and the S&P 500 added a few points. Market breadth told a favorable story, as advancing issues outpaced decliners by a healthy margin on both the New York Stock Exchange and the NASDAQ.
Before the opening bell, there were concerns that the firing of FBI Director Comey might create some volatility in a market seen by many as richly capitalized. That proved not to be the case, although expectations for broad tax cuts appeared to be put a little further in the distance, since the Senate will presumably need to take time out to confirm any incoming nominee to head the Bureau.
The business-as-usual tone suited Wall Street fine, with stocks generally making progress with the exception of the Dow-30, which was hampered early on by weakness at entertainment conglomerate Disney (DIS - Free Walt Disney Stock Report). Disney’s earnings topped analysts’ estimates, but revenue came up a bit short. The main concern is for the company’s ESPN networks, which are being crowded out by other services. Good performance at Disney’s movie studios and its parks & resorts division likely put a floor under the stock, though.
Later in the day, the Dow was dragged down by word out of Boeing (BA - Free Boeing Stock Report) that the aerospace/defense giant was suspending test flights for the next generation of its stalwart 737 plane, due to engine issues. Boeing’s woes were isolated, though, and didn’t drag down the broader market.
Among the major sectors, shares of energy companies outperformed on a larger-than-expected drawdown of crude oil inventories as reported by the Energy Department, which lifted oil prices notably. Oil quotations turned in their best percentage gain of the year as a result.
Gasoline prices, for which the national average now stands at $2.34 a gallon, may rise in the next couple of weeks, as well, as the driving season gets under way ahead of the fast-approaching Memorial Day at the end of this month. – Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Mid-Day Upate - 12:15 PM EDT
The major U.S. indexes spent most of Wednesday morning in the red, as investors continue to process earnings and weigh the impact of President Trump’s decision to relieve FBI Director James Comey of his duties. Losses in the Dow were exacerbated by earnings-related selling of Walt Disney (DIS – Free Disney Stock Report) stock, which continues to suffer due to struggles in its cable business. The news from Washington came after yesterday’s market closed, and has stoked some concerns that the disruption will distract or delay the implementation of key regulatory and reform promises that have driven the market to its record levels. Still, since the impact of the firing was more muted by mid-morning, we suspect investors remain confident that the Administration’s policy objectives remain on track.
As earnings season winds to a close, several high-profile retailers are still scheduled to report results. Among them, the quarterly performance from Nordstrom (JWN), Macy’s (M), and Kohl’s (KSS) should indicate how investors will look at the sector going forward. Friday morning’s retail sales report will also be closely watched. Other updates from the business beat expected this week include consumer sentiment, business inventories, and jobless claims data. The latter will play a big role in the Federal Reserve’s outlook. Though the central bank will not meet to mull another interest rate hike until its mid-June summit, several speeches by regional Fed Presidents this week also be considered by traders as the second half of the week plays out.
Meanwhile, U.S. crude oil has seen some relief today following news of a wider-than-anticipated reduction in domestic stockpiles. The Energy Information Administration reported that inventories fell by 5.2 million barrels last week. Also helping to boost sentiment for the commodity is Saudi Arabia’s plan to reduce Asian output by 7 million barrels in June. The decrease is reportedly part of OPEC’s proposed drilling accord extension, which investors hope can help to address the global glut in supplies.
So, while breadth is even and the market sectors are mixed, the bulls appeared to be leading something of a rebound as we crossed into the afternoon. In fact, as of this report’s writing, the S&P 500 rose into positive territory, while the NASDAQ and Dow pared most of their respective losses. However, given the range-bound pattern of recent sessions, we continue to expect another directionless result on the stock exchange today. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
It was a directionless day of trading on Wall Street yesterday. In general, investors seem to be taking a bit of a breather after a whirlwind stretch over the last fortnight, in which they were inundated with a slew of earnings reports; some key important economic data, including the first reading on March-quarter GDP growth and the employment figures for April; the latest Federal Reserve monetary policy decision; and some reports from Washington D.C., highlighted by the Republican-controlled House of Representatives passing legislation to repeal and replace the Affordable Care Act. The healthcare issue will now move to the Senate for debate in what is shaping up to be a very contentious battle on Capitol Hill.
Yesterday, the major U.S. equity averages never strayed too far away from the neutral line. In the end, the results were mixed, with the large-cap Dow Jones Industrials and the broader S&P 500 Index shedding 36, and two points, respectively, while the tech-heavy NASDAQ added 18 points, to finish the session at an all-time high. Market fundamentals also painted a mixed picture, with advancing issues leading decliners by a slight margin on the NASDAQ, while losing stocks held the edge on the New York Stock Exchange. From a sector perspective, there was a mixed of up and down arrows among the top-10 equity groups. Finishing in the plus column were the consumer discretionary, healthcare, and technology stocks, while yesterday’s biggest laggards were the energy, financial, and utilities sectors. The rise in bond yields weighed on the higher-yielding equities yesterday.
The big theme circulating around Wall Street yesterday was the record low level for the S&P 500 Volatility Index (or VIX), also known as the “fear gauge,” which fell to its low mark in more than a quarter century. Some market pundits think this may be an ominous sign for stocks, as investors may be taking on more risk than they can handle—and there could be some consequences down the road in the stock market. The Federal Reserve, which has been on unprecedented run of accommodative monetary policy, has created an environment where there are few attractive alternatives to stocks and, with some supportive earnings news lately, there is little reason for investors to take profits, even with valuations looking quite stretched. That said, there was a small pickup in volatility in the final hour of trading yesterday, which may have been prompted by reports late in session that rogue nation North Korea was planning to conduct its sixth nuclear weapons test. However, the major indexes did come back in the final minutes, to pare the losses for the Dow 30 and S&P 500 Index. The small-cap Russell 2000 finished the session with a slight gain.
Perhaps some of the complacency in the market to start the week is due to the fact that there has been little in the way of market-moving news coming from either the earnings or economic fronts. Today will be another quiet day on the business beat, but we did receive some notable quarterly data since the close of trading yesterday afternoon. Dow-30 component Walt Disney (DIS - Free Disney Stock Report) reported mixed results. Specifically, the entertainment giant reported share earnings of $1.50, which exceeded the consensus of $1.41, but revenue came in below expectations. The investment community did not like the top-line miss and the stock is trading lower in pre-market dealings. Other notable companies to report earnings since last night included NVIDIA (NVDA), Mylan (MYL), and The Priceline Group (PCLN). After today’s closing bell, we will get the latest earnings from Whole Foods Market (WFM).
With less than an hour to go before the commencement of trading stateside, the equity futures are indicating a mixed opening for the U.S. equity market. The Dow and S&P 500 Index are likely to open to some modest profit taking, while the NASDAQ may build off of its record close yesterday. Overnight, the main indexes in Asia put in a mixed performance, while the major bourses in Europe are relatively unchanged as trading enters the second half of the session on the Continent. Adding this all up, it is looking like it may be another nondescript session on Wall Street today. 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.
