After the Close
The stock market got off to a somewhat tentative start earlier today, but managed to firm up in the afternoon. At the close of trading, the Dow Jones Industrial Average was ahead 55 points, while the broader S&P 500 Index was up 10 points, and the NASDAQ was higher by 25 points. Market breadth was favorable, as advancers easily outpaced decliners on the NYSE. Most market sectors made progress. There were sizable gains in the energy and materials issues, offset by some weakness in the healthcare area.
Meanwhile, traders received one key economic news item earlier today. Specifically, according to the Labor Department, non-farm payrolls rose by 211,000 in the month of April. This result came in well ahead of the consensus forecast, and was also a big improvement over the weak number delivered in March. Further, the headline unemployment rate dipped slightly, to 4.4%, which was also an encouraging development. This month’s report suggests that the nation’s economy is still in decent shape, even though there may be some soft patches, here and there. Although there is little to suggest that inflation is becoming a problem, the latest employment numbers may well provide the Federal Reserve with justification for lifting interest rates again. Many traders think that this could take place at the June meeting. For the most part, Wall Street took the report in stride, as the stock market remained relatively stable.
Elsewhere, the first-quarter corporate reporting season is in its final stages. However, a few companies are still delivering results. We recently heard from Monster Beverage (MNST). That stock was up today in response to a solid report. Meanwhile, shares of Revlon (REV) sank, after the cosmetics giant delivered a weak issuance.
Technically, the stock market has been holding its ground lately. The S&P 500 Index is just shy of the 2,400 mark, which seems to be an area that could present some resistance. Of note, this was the case in early March, and again in late April. (For those watching the Dow, that average is just at 21,000, which may be significant). While some progress is being made on the economic and corporate fronts, it should be noted that the equity valuations seem a bit elevated, and this may make additional gains harder to achieve. Stay tuned. - 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 - 12:15 PM EDT
Before the Bell
It certainly was a disarming first three days of the trading week on Wall Street, to be sure, with the leading averages moving in and out of positive territory throughout that brief span. Then yesterday, it seemed for a while as if there would be a definitive trend, and initially, it appeared as though that trend would be positive. However, the early buying proved to be a false signal, and in minutes, the key indexes not only had given up their gains, but had dropped into the minus column. At first, the selling was rather contained, but as the morning progressed, it became more substantial.
Behind the shift in mood were concerns about the attempt by House Republicans to repeal and modify the existing healthcare law, known formally as the Affordable Care Act. (An affirmative vote on repeal of the ACA was taken yesterday afternoon.) More to the point was angst ahead of the just-issued April employment report (see below). But the big story yesterday, as the flow of earnings reports was lessening, was the sharp retreat--to a five-month low--in the price of oil. Crude dropped below $46 a barrel, in fact, on supply concerns. That setback caused energy stocks to fall sharply on the day.
After that reversal in direction, the equity market largely stayed range-bound until the lunch hour. At that point, stocks broke more sharply to the downside under the weight of a further deterioration in energy prices. To wit, the Dow Jones Industrial Average, off between 20 and 40 points for much of the morning, suddenly dropped to a session-worst decline of some 110 points. But that drop was quickly contained and lesser deficits soon followed, with the averages moving into a much more contained, but lower, range. The equity market then resumed its stable showing into the first hours of the afternoon.
Meanwhile, even as peak earnings season is passing, there are enough releases to keep traders on alert. For the most part, the issuances have been reassuring, with as many as 75% of the companies in the S&P 500 surpassing bottom-line expectations and a comfortable majority doing so on the revenue line. As to the economy, another timely topic for investors, jobless claims eased in the latest seven-day span, while the U.S. trade deficit narrowed. So, those numbers were somewhat supportive. But oil remained the big news on this penultimate trading day of the week.
The stock market then tried to rebound in late afternoon, with the NASDAQ and the S&P 500 Index each moving back into positive territory once more, while the once-hefty Dow loss narrowed notably. The deficits on the S&P 400 and the Russell 2000 also eased, but did not fade completely. The attempt by the S&P 500 and the NASDAQ, meanwhile, finally succeeded, if just modestly, while the Dow ended off by six points. Losing stocks also held the lead, and by a fairly sizable margin at the close on the Big Board. That edge by the bears was much smaller on the NASDAQ.
As to the day ahead, stocks were lower in Asia overnight on concerns about falling oil prices, while in Europe, the bourses are now showing losses, as well, likewise on those oil fears. Also following the sharp drop in crude yesterday, oil prices are off again so far this morning. Interest rates on Treasuries, meantime, are nudging up, and U.S. equity futures remain little changed in the wake of the job's report. As for that issuance,the Labor Department has reported non-farm payrolls jumped by 211,000 in April. A gain of 185,000 had been the forecast. Also, the unemployment rate came in at 4.4%; a 4.6% rate had been the forecast.
Finally, breaking the report down, we see that this strong gain came after a dour March reading, in which just 79,000 jobs had been added, a downward revision from the initially estimated 98,000 increase. Meanwhile, non-farm payrolls were revised up for February from a gain of 219,000 to a rise of 232,000. Also, the labor force participation rate held at 62.9% suggesting a labor force that is still not growing all that strongly. At the same time, average hourly wages ticked up by seven cents. In March, the increase had been six cents. Over the past year, wages are up by $0.65 an hour, or 2.5%.
All in all, this was a solid report and, if anything, increases the odds of a June interest rate hike by the Federal Reserve. That meeting is due to take hold on June 13th and June 14th. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
