After the Close
Stocks trading in listless fashion today as a lack of catalysts kept buyers on the sidelines. At the close, the Dow Jones Industrial Average was up eight points; but the NASDAQ was down 23 points; and the broader S&P 500 was off a few points. Market breadth was clearly negative, indicating a bearish undertone to the session.
With earnings season still under way, investors were looking for encouragement from tech titan and Dow-30 component Apple, Inc. (AAPL - Free Apple Stock Report). But Apple’s report provided a bit of a mixed review, given that revenues and iPhone shipments came up shy of Wall Street’s expectations. Somewhat higher adjusted earnings per share weren’t sufficient to keep Apple shares from opening lower, although the shares did come back as the day wore on. Optimism regarding the pending release of iPhone 8 in the fall likely put a floor under the stock.
More broadly, the muted response to Apple’s profit report seemed to weigh on the tech space. The NASDAQ has been this year’s big winner among the major averages, but there was little to fuel the fire today.
In general, though, earnings season has gone well, with most companies turning in better-than-expected revenues and profits. That has supported investor sentiment lately.
The day’s other big news was largely expected, in that the Federal Reserve left interest rates unchanged at one of its periodic policy meetings. The Fed gave the distinct impression that the time was not right to further tighten monetary policy, as is its goal, with economic growth in the first quarter not registering a strong-enough number. The central bank intoned that it believes the pace of GDP growth will soon pick up, though. Most likely, that means a couple of more rate hikes are on the table for 2017.
Elsewhere, in a presage to this Friday’s government employment report, Automatic Data Processing (ADP) released its own April jobs report, which showed a gain of 177,000 positions, or slightly higher than the 175,000 forecast. Before the market opens on Friday, the Labor Department will release data showing the number of jobs added in April. Expectations are for 200,000 jobs to have been added.
Trading is sometimes muted the day prior to the release of the employment figures, which could be the case on Thursday, although word on the fate of possible health-care legislation could sway investors one way or the other. – Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:15 PM EDT
The majority of U.S. equities are trading lower today, as investors parse through recent earnings reports and await the Federal Reserve’s statements on monetary policy this afternoon. Though the likelihood of a rate hike is slim to none, the update will be a valuable asset for traders looking for more clarity on the central bank’s economic outlook. Today’s bearish undertone follows two days of mixed-to-positive movement, while the Fed decision and Friday morning’s monthly jobs update from the Labor Department are the primary non-earnings stories of note.
On the business beat, a report from Automatic Data Processing (ADP) showed the U.S. private sector added 177,000 jobs, slightly eclipsing the 175,000 expectation. The impact of this modest beat was negated by earnings news and, more important, anticipation of Friday’s April jobs report from the Department of Labor. Consensus expectations are for a rebound from March’s underwhelming data. The ADP report showed that hiring in the construction and retail sectors was weak last month, which most analysts are hoping is not a harbinger for the end-of-week report.
Though each of the indexes were in the red throughout the morning, the NASDAQ was the biggest laggard. The tech-laden group fell from record highs in reaction to Apple’s (AAPL – Free Apple Stock Report) mixed quarterly release. The stock was down around 1% in value this morning due to lower-than-expected iPhone sales, even though it did manage to surpass profit expectations. In fact, roughly three-quarters of reporting companies have beaten earnings estimates so far in the season. Some rotational trading is at play, too, as the energy sector has shown pockets of strength while the basic materials grouping is shedding some of its gains from yesterday’s session.
Still, even with a mid-morning downturn, we see each of the indexes remaining in the same tight band they’ve occupied for several days. The rest of the Wednesday’s fortunes will likely hinge on the Fed’s 2:00 PM (EDT) policy update. After the market closes, Facebook (FB) and Kraft Heinz (KHC) lead the latest wave of corporations reporting their March-quarter earnings, which ought to steer trading early tomorrow morning. Until Friday’s jobs report, though, we expect the range-bound tug of war will continue. – 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
After a lethargic and mixed session to start the new week and month on Monday, Wall Street's bulls sought to restart the engine of stock market prosperity yesterday morning, and for the first few minutes of trading managed to do so with some success. However, that good feeling was fleeting, and within a half hour or so some minus signs had reappeared and stocks were falling modestly, save for the Dow Jones Industrial Average, which managed to hold above the neutral line, underpinned once more by a rather modest gain in shares of Apple (AAPL - Free Apple Stock Report), the tech icon, which was set to report its results after the closing bell.
Meanwhile, when the early selling proved to be little more than some overdue profit taking, stocks steadied once again. That has, in fact, been the pattern of late, so no major selloffs have ensued. Meanwhile, the major market themes yesterday remained earnings, which continued to largely fulfill expectations, the latest goings on in Washington, which continue to revolve around health care and tax reform, and the Federal Reserve's FOMC meeting, which commenced yesterday morning and will conclude this afternoon at 2:00 (EDT). No change in interest rates is the widespread expectation.
This mixed-to-lower pattern then continued a bit further into the morning, but as we approached the noon hour in New York, the bulls started to reassert themselves, so that we reached the halfway point on this first day of the two-day FOMC meeting with the Dow up some 35 points and with the S&P 500 Index and the NASDAQ both inching back into the black. However losses were still in place on the S&P 400 and the small-cap Russell 2000. Still, virtually all of the 10 leading equity groups were in positive territory, if grudgingly so, while gaining stocks held a narrow lead on NYSE decliners.
The modestly positive market trends then continued into the mid-afternoon, with the Dow holding gains on the order of 30 points, or so, until the final 90 minutes of trading, while the S&P 500 also held in the black, albeit much more gingerly, and the NASDAQ, in spite of selective strength in technology, stayed on both sides of the neutral line. It seems as though Wall Street was in a watchful waiting stance ahead of earnings from tech behemoth Apple. In addition, there was logical anticipation ahead of the Fed meeting's conclusion and accompanying monetary statement this afternoon.
As to the Fed, fewer than 5% of those pundits expressing an opinion expect the lead bank to make a rate move at this meeting. Most see a further rate hike at the next (mid-June) gathering and at least one more increase during the second half. There also is uncertainty about just how much of the Administration's legislative agenda will get adopted, with health care, the big sticking point, still, apparently, shy of the votes needed for the so-called repeal and replace of the Affordable Care Act. So, stocks drifted in mixed afternoon trading. Finally, there are upcoming economic reports to scrutinize.
The market then drifted into the close, with the Dow managing to retain a moderate increase on the day, but with the other indexes weaving both in and out of positive territory throughout the afternoon before settling in with small gains on the other large-cap averages, but further losses in the smaller groups. As noted, earnings, the Fed, Washington, and the economy--with Friday's report on April non-farm payrolls being the major item here--remain the major areas of concern. Our sense is that the equity market will not make a major move before Friday and that morning's report on the employment situation is released at 8:30 (EDT).
Looking out on a new day, and following up on Apple's solid earnings report issued after the close, but shortfall on iPhone sales, we find that stocks in Asia were mixed in overnight trading, while in Europe, the principal bourses are trading lower. Also, of note, oil is a tad higher; Treasury yields are up nominally; and U.S. equity futures are trading a little lower at this hour. The day, meantime, will be replete with additional earnings releases, the key Fed statement, and a 10:00 AM (EDT) report on non-manufacturing activity. Stay tuned. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
