After The Close
The stock market managed to stage an advance early this morning, but the gains quickly evaporated as the session progressed. In addition to digesting the latest batch of corporate earnings reports, traders worried that trade negotiations with China may not end constructively. At the close of the day, the Dow Jones Industrial Average was down 55 points; the broader S&P 500 Index was off two points, and the NASDAQ was lower by almost 16 points. Meanwhile, market breadth was about even, with advancers just ahead of decliners on the NYSE. The energy sector made notable progress today, while the high-yielding utility issues weighed on the market.
There were a few economic reports released today. Initial jobless claims rose slightly to 222,000 during the week of May 12th, where analysts had anticipated a better reading. Elsewhere, according the Philadelphia Fed, business conditions in the greater Pennsylvania region picked up nicely in the month of May. Further, the Conference Board’s Index of Leading Indicators increased 0.4% in April, which was in line with the consensus view.
In the corporate arena, a few visible names reported their results over the past 24 hours. Specifically, shares of Cisco Systems (CSCO – Free Cisco Stock Report) retreated on concerns about the company's business outlook. Also, shares of Walmart (WMT – Free Walmart Stock Report) slipped in price, as investors were unimpressed by the retailing giant’s recent report.
Technically, the stock market has made some progress in the first weeks of May. However, it remains to be seen if the bulls can keep their buying campaign in place.
— 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
Following a sizable selloff on Tuesday, as the Street was rattled by a sudden further spike in interest rates on the heels of a strong performance in monthly retail sales, the stock market calmed down somewhat as the middle day of the week began. Initially, stocks were little changed, but as the morning progressed, the equity market assumed a nicely higher bias, with the Dow Jones Industrial Average, a 193-point loser on Tuesday, recovering a little ground with a near 60-point advance as we hit the noon hour on the East Coast. Proportionately better gains, meantime, were tallied by the S&P 500 Index and the NASDAQ.
Interestingly enough, this positive bias evolved even though Treasury note yields, which had climbed to 3.10% on Tuesday, before backtracking to 3.06% early yesterday morning, jumped back up to 3.09% as the afternoon began. Also, the market gains came even as the earlier optimism surrounding the hope-for high-level talks between the leader of North Korea and the President looked to be fading. However, stocks did get a lift from encouraging retailer earnings reports. This group of companies, which normally are on a somewhat different schedule than most others, are now busy reporting their April-period metrics.
Here, for example, giant retail chain Macy's (M) saw its shares jump on the back of strong quarterly earnings. The stock, which has been a strong performer in recent months, saw its stock jump another 11% by early afternoon. In all, that issue has nearly doubled in price from its 52-week low. Also, the company posted better than a 4% increase in same-store sales, which is a critical metric for retailers. Thus, aided by the outperformance of Macy's and the uplifting words of its CEO regarding upcoming consumer spending in general, the market rallied, with the Dow climbing to a gain north of 90 points as we moved inside the final two hours of trading.
Meanwhile, in other news, the economy is still in play. To wit, data issued at 8:30 AM (EDT) yesterday affirmed that the housing market had eased off slightly in April, with housing starts dipping by 3.7% on a consecutive-month basis. Still with an annualized build rate of 1.287,000 homes under construction, this core category remains strong. Starts, in fact, were up nicely from a year earlier. Also issued at that time were data on building permits, a more forward-looking metric. Here, the decline from March to April was just 1.3%. Also of note, the year-to-year comparison was favorable, with permits gaining 7.7%.
Also on the business-release docket were figures on industrial production and capacity utilization. Here, the matchups were nicely positive. Specifically, industrial production rose by a strong 0.7% in April, the third consecutive monthly advance, while capacity utilization rose from 77.6% to 78.0%. Such strength augurs well for a solid second quarter within the economy. On point, after a decent, but still underwhelming GDP increase of 2.3% in the opening term, we could well see growth exceed 3% in the current three months. The solid industrial activity followed reports of a nice gain in retail sales, which was issued on Tuesday.
Given these largely constructive metrics, the market continued to head higher, but the gains were capped by an uptick in Treasury note yields, to 3.10%. That matched the highs reached on Tuesday. All told, the final bell saw the Dow, with a last-minute spurt, rise 63 points, while more formidable increases of 11 and 47 points were logged, respectively, by the S&P 500 and the NASDAQ. Meantime, the small-cap Russell 2000 added 14 points, or almost a percentage point. Breaking things down, we see that nine of the 10 leading equity sectors closed higher, with only the utilities falling, while gaining stocks held a large lead over declining issues.
Looking out on a new day, we see that the markets had a generally negative bias in Asia in the overnight hours, while in Europe, the leading bourses are edging higher so far this morning. In other markets, oil prices are up again, with Brent crude hitting $80 a barrel in Europe, and yields on the 10-year Treasury note are at 3.10% after a close at that level yesterday. Finally, U.S. futures are suggesting a modestly lower opening when trading resumes a little later this morning.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
