After The Close
The stock market lost considerable ground this morning, but managed to pare its losses in the afternoon. Some of the weakness earlier in the day had to do with the Presidential Administration’s decision to cancel its planned June summit with North Korea. At the close of trading, the major averages were still in negative territory. The Dow Jones Industrial Average was down 75 points; the broader S&P 500 Index was off nearly six points, and the technology-heavy NASDAQ was lower by one point. Market breadth was negative today, as decliners were ahead of advancers on the NYSE. Most of the major market sectors moved lower, with a large setback in the energy patch. In contrast, the utilities managed to advance, possibly as investors looked for safety in a turbulent market.
There were a few economic reports released this morning. The results were not particularly inspiring. Of note, initial jobless claims moved up to 234,000 during the week of May 19th, where analysts had anticipated a lower reading. Further, existing home sales dipped to an annualized rate of 5.46 million units during the month of April, falling just short of the consensus forecast. Tomorrow we will get a look at durable goods orders for the month of April, and a monthly consumer sentiment figure from the University of Michigan.
In the corporate space, a number of widely watched companies posted profit reports over the past 24 hours. Specifically, shares of NetApp (NTAP), Williams-Sonoma (WSM), and Medtronic (MDT) rose in price today, after these companies delivered encouraging reports. In contrast, shares of Best Buy (BBY) retreated, after the electronics retailer failed to impress Wall Street.
Technically, the stock market moved up in the first weeks of May, but now seems to be struggling to press higher.
— Adam Rosner
At the time of this article’s writing, the author did not have positions n any of the companies mentioned.
Before The Bell
The stock market, which rose sharply on Monday, as the Dow Jones Industrial Average gained a stirring 298 points, and which then proceeded to give back about two-thirds of that initial session win on Tuesday, after the President acknowledged that a June 12th meeting with North Korea was not a certainty, would then open yesterday's session notably to the downside. Continuing fallout from the uncertain North Korea news and concerns that a trade accord with China might not be on the way either, combined to take the market decidedly lower at the outset of the day.
Early on, in fact, the Dow would again suffer a triple-digit decline, with a setback of about 140 points. However, that pullback would prove to be short-lived, and as the first hour ended the Dow's deficit had been cut in half. The other key indexes improved as well. Meantime, there were several issues at hand that might have influenced early trading. On point, data issued by the government showed that new home sales dipped in April on a consecutive-quarter basis, whereas a slight gain had been the forecast. However, sales were up from a year earlier, signaling that the housing market was still in a recovery, overall.
Also, of note, earnings were in the news, but with most companies already having reported, the news was largely confined to the retail sector, where quarters ending in April are the rule. Here, giant Target (TGT) posted disappointing results, as its profit margins narrowed, and that stock was off rather sharply in early dealings. It was another case at do-it-yourself retail behemoth Lowe's Cos. (LOW), as that company weighed in with strong results and the stock rallied in response. In particular, the issue rose after Lowe's maintained its annual targets for the year.
But the big news on the day was geopolitics. To wit, the news from both North Korea and China were weighing on investors, in a reversal from days earlier when the world had briefly seemed to be a less unsettled place, both from economic and political points of view. Meanwhile, after that comeback by the market within the first hour, the bears came out again and drove the averages back down to their morning lows on those global concerns. Even so, given the world's uncertainty, the home sales miss, and the mixed profit picture, a still somewhat frothy stock market has been behaving relatively well, all things considered.
The losses then eased back somewhat as we hit the noon hour, with the lows set early in the session largely holding to that time save for a brief dip in the Dow below that level. Of note, the Street also was on edge before the release, at 2:00 PM (EDT), of the minutes from the latest FOMC meeting. Traders were waiting for hints of whether the Fed was looking for two or three additional interest rate increases this year. So, there was little further movement leading up to that mid-afternoon Fed issuance. As for the market, there was a better showing by the smaller issues and the NASDAQ, with the Dow leading the way lower to that point.
As for the FOMC minutes, the lead bank suggested that it would let inflation run above its 2% target for a temporary period. In all, the Fed expressed satisfaction with the current rate of economic improvement and speculated there would likely be two additional rate hikes this year. Some, though, are suggesting that we could have a third (fourth in all) adjustment in 2018. The benign Fed stance would then help the market to pare its losses in the minutes following the release. In fact, the S&P 500 and the NASDAQ would go positive, while the Dow's loss eased back sharply.
The comeback then expanded to finally take in the Dow, as we entered the final hour, with that composite going into the green, as well. One of the effects of the Fed release, meanwhile, is that yields on the 10-year Treasury note eased back to an even 3.00% late in the day. Earlier this month, the yield hat hit 3.12%. As to the equity market, the NASDAQ and the S&P 500 stayed positive, while the Dow went in and out of the plus column, finally settling in with a closing gain of 52 points on some last-minute buying in the blue chips. The S&P 400 also held near breakeven on the day. All told, it was a modestly better day.
Looking out at the penultimate session of the week, which will end tomorrow ahead of a three-day weekend to observe Memorial Day, we see that stocks were mostly lower in trading in Asia overnight, while in Europe, the leading bourses are tracking higher at this time. Also of note, oil prices are down on expectations of increased OPEC supplies and yields on the 10-year Treasury note, which ended matters yesterday at 3.00%, are now trading at 3.01%. Finally, all of this is leading to little aggregate movement in the futures on our shore. Hence, a mixed to narrowly higher equity market opening would seem likely, at this time.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
