After the Close
Stocks moved notably lower this morning, but managed to pare much of these losses in the afternoon.
At the close of trading, the Dow Jones Industrial Average was down 24 points; the broader S&P 500 Index was off five points; and the NASDAQ was lower by 13 points. All the while, though, there was a negative bias to today’s session, as declining issues outpaced advancers on the NYSE. Most of the major equity groups lost ground, with considerable weakness in the telecom, financial, and consumer-cyclical issues. However, the defensive utility names held up relatively well.
Meanwhile, traders received a mixed batch of economic news this morning. Specifically,the Producer Price Index jumped 0.5% in the month of April, where analysts had been looking for a more incremental advance. While inflation has remained under control, so far, this latest monthly report may be of concern to traders watching the Federal Reserve. Elsewhere, initial jobless claims moved lower to 236,000 for the week of May 6th, where analysts had been looking for a slight rise in claims. This week’s figure suggests that the nation’s employment situation remains healthy, despite pockets of weakness here and there. Tomorrow we will get a look at the Consumer Price Index for the month of April along with business inventories for May.
Elsewhere, in corporate news, a few companies weighed in with their results over the past 24 hours. Specifically, shares of Macy’s (M) plunged after the department store giant delivered a weak report. In addition, shares of Kohl’s (KSS) fell sharply in price, as investors had concerns about the company’s top line showing and business outlook.
Technically, equities seem to be running into some resistance, after attempting to move into new high ground. Of note, today, the S&P 500 Index sank eased a bit back below the 2,400 mark, which is likely a critical level to watch. It is not clear what will serve as the catalyst needed to push stocks higher from here, especially as the first-quarter earnings season has tapered off and the summer months are approaching. – 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 - 11:40 AM EDT
Following a further undistinguished performance by the bulls and the bears yesterday, the stock market opened the penultimate session of the trading week with modest losses. However, that small retreat quickly mushroomed into a full-fledged downturn, so that by 10:00 AM (EDT), the Dow Jones Industrial Average was off by more than 140 points, while the NASDAQ had tumbled to a 46-point loss. The selloff followed the release of disappointing quarterly results from giant department store chain Macy's (M). That stock was off by some 12% early.
In all, the retailer posted adjusted earnings of $0.24 a share, about a third less than the consensus forecast. Sales also were light. Other retailers faltered as well, albeit less materially. A comparable sales miss and weaker gross margins hurt Macy's performance. Also on the minds of traders is the upcoming schedule for tax reform, which some now logically fear might be delayed following the fallout from President Trump's abrupt firing of erstwhile FBI Director James Comey late Tuesday afternoon. Equities had rallied strongly and then maintained their high levels after Mr. Trump's surprise election last November on those tax cut hopes.
In other news this morning, data issued before the stock market opened showed that the Producer Price Index had jumped by 0.5% in April. That was well above the consensus forecast of a 0.2% rise and much higher than the March figure. Also of note, the Labor Department reported that weekly jobless claims had totaled 236,000 in the latest seven-day span. A 245,000 figure had been the expectation. All of this will be followed tomorrow by data on consumer prices (an April increase of 0.2% is the expectation), and retail sales. In this latter category, a rise of 0.6% is the consensus view.
Meanwhile, the stock market continued to falter, with the Dow's loss generally ranging from 100 to 140 points, until the late stages of the morning, when the bulls stepped in and pared the Dow's deficit to fewer than 100 points, while the NASDAQ's loss held in the range of 40-45 points. The S&P Mid-Cap 400 and the small-cap Russell 2000 both tumbled, as well, falling more than a percentage point each at the morning's nadir. The big story on the day, however, was the retail situation, with Dillard's (DDS) also faltering, along with Macy's, on disappointing metrics.
As we reached the late morning, the stock market remained decidedly in the minus column, with the Dow off by just under 100 points. Also of note, the S&P 500 Index was lower by 12 points and the Russell 2000 had dropped by 15 points. Further breaking down the morning's retreat, we see that all 10 of the leading equity sectors were down, but, like the averages, themselves, were also off their respective lows, while losing issues on the Big Board were ahead of winning stocks by three to one. So, approaching the afternoon's trading, the market was decidedly lower, but not at its worst levels of the session. – 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
After a pair of undistinguished stock market sessions to start the second week of May, traders began the middle day of this five-day span with moderate losses. At the morning's low, the Dow Jones Industrial Average was off some 70 points, while modest setbacks were sustained by the S&P 500 Index and the NASDAQ. The smaller-cap equity indexes, however, maintained some relative initial strength on this relatively heavy political, earnings, and economic news day.
Specifically, the market was pressured early in the day by some fallout from the previous evening's abrupt firing of FBI Director James Comey. President Trump let the FBI Director go just before 6:00 PM (EDT) and thus some two hours after the equity market had closed. There was some concern on the Street that this potential political drama could wind up delaying tax reform, with hopes for the latter event continuing to be a big factor in the stock market's ongoing strong bull market rally.
Also of note, and additionally disturbing to traders, was a sharp early retreat in shares of entertainment provider and Dow component Walt Disney (DIS - Free Disney Stock Report). Although quarterly earnings surpassed expectations, results were a bit shy on the revenue line. At the morning's nadir, the stock, a strong performer recently, was off by nearly four points. Disney then would pare its deficit as we moved closer to the noon hour in New York. Elsewhere, stocks had a much more mixed tone to them in many areas.
Finally, there was the economy. And here the news was somewhat more compelling. On point, news out affirmed that mortgage applications rose 2.4%, signaling further resilience in the recovering housing market. Also, import prices rose more than expected. However, the big story on the day was a larger-than-expected drop in crude oil inventories in the latest week. That pullback helped oil prices to rebound by several percentage points, perhaps putting in a short-term floor on crude, after a steady prices decline in recent weeks.
So, given all this, it was not too disturbing that the market managed to hold just modestly lower, overall, heading into the afternoon, On point, as the afternoon began, the Dow, under pressure from a near three-point loss in Disney, was off some 20 points, while the NASDAQ was weaker by a handful of points. Things then stabilized into the afternoon, with the Dow continuing to hold at lower levels, but the S&P 500 Index and the NASDAQ making a series of attempts, which proved ultimately successful, to edge into the black.
The market then stayed range-bound into the close, and when all the numbers were in, the Dow, weighed down all session long by Disney, fell 33 points. However, the NASDAQ edged up nine points; the S&P 500 Index was ahead three points; and the Russell 2000 was better by eight points. All in all, it was a rather constructive session, with the response to the Comey firing quite muted, as traders continue to see this as just a brief interlude that will not materially affect the schedule for tax reform.
Looking out at a new day and at a succession of corporate earnings reports and some economic data, we see that stocks were generally higher in overnight dealings, while on the Continent, shares in Europe are lower on earnings concerns so far this morning. In other markets, Treasury yields, which climbed back above 2.40% on the 10-year note yesterday, are a tad lower in dealings to this point; and oil is up again. As to our markets, the early read in the equity futures is a bit weaker, suggesting a softer opening at 9:30 AM (EDT) this morning. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
