After the Close
The stock market kicked off the new trading week with a lackluster performance. At the close of the session, the Dow Jones Industrial Average was up about five points, while the broader S&P 500 Index was up nominally, and the NASDAQ was higher by two points. Market breadth still showed a negative bias to the session, as losers outnumbered winners by a modest margin on the NYSE. Most of the major market sectors retreated. There were sizable losses in the healthcare and basic materials issues. However, the technology and energy names managed to advance.
Meanwhile, no economic news items were released today. However, traders may still be mulling over the April employment numbers delivered last Friday. Overall, that report was quite constructive, and suggested that the nation’s economy remains in recovery mode, despite some softness, here and there. Tomorrow will be a relatively light day for news, too. Although, we will get a look at wholesale inventories for the month of March. The pace of reports should pick up again on Wednesday, which may help motivate traders.
Elsewhere, the first-quarter corporate reporting season is nearing an end. However, we recently heard from Tyson Foods (TSN). That stock was down sharply, after the meat processor delivered a disappointing report. In contrast, shares of Newell Brands (NWL) surged after the company posted a solid set of numbers.
Technically, the stock market has been performing reasonably well, lately. Some of the major averages are near milestone levels, after pulling back in early March. For one, the S&P 500 Index is just below the 2,400 mark, which seems to be an important level to watch. Still, it remains to be seen if the bulls can push stocks higher from here. – 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 -12:00 PM EDT
The new trading week is off to a nondescript start, with some modest profit taking on display. The selling is not overly surprising, as the NASDAQ and the broader S&P 500 Index both hit record highs last week and there was little in the way of market-moving news to push the major averages up off of the already lofty perches. Indeed, it was quiet on the business beat and there was no prominent earnings reports this morning from Corporate America. Thus, as we hit the noon hour on the East Coast, the two aforementioned indexes and the Dow Jones Industrials are all slightly in the red.
Meantime, the news that centrist Emmanuel Macron had won yesterday’s Presidential election in France did not give a boost to equities both on the Continent and in the United States. The result was desired by Wall Street, as it reinforces France’s allegiance to the European Union, a situation that would not roil the world’s financial markets. However, our sense is that the markets had already baked Mr. Marcon’s win into valuations and the actual victory did not give stocks much of the boost. The major European bourses and the main U.S. indexes rallied sharply a few weeks ago when it became evident that yesterday’s outcome was the most likely scenario. It is looking like the classic case of “buy the rumor, sell the news.”
From a sector perspective, nearly all of the top-10 groups are in the red, but the selling is still rather contained across the board. The biggest laggards are the basic materials, telecommunications, and the utilities issues. Conversely, we are seeing some slight buying in the technology sector. Investors, though, should note that the spread between winning and losing issues, which was quite thin in the early going, has widened in the last hour in favor of the bears on both the New York Stock Exchange and the NASDAQ. Market fundamentals at this time are pointing to a lower closing for the week’s first trading session.
Our sense is that the market is taking a bit of a pause both here and on the Continent, with several of the major indexes trading near all-time and multiyear highs. And given that it is looking like a relatively quiet week on both the earnings and business beats, the trading may prove rather deliberate over the next few sessions. Investors may be waiting for the next driving force to push the indexes, but with the Federal Reserve not meeting again until mid-June and earnings season starting to wind down, it may have to look elsewhere for a major story. Perhaps, Washington D.C. will step in and pick the slack in the coming days. Healthcare and tax reforms remain a hot-button topic these days. Stay tuned. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
The most recent five-day stretch of trading on Wall Street was a busy one, as investors had to digest a number of significant reports on the economy, earnings data, the Federal Reserve’s monetary policy decision, and the latest musings from Washington D.C. Over the course of the week, the headlines seemed to offset each other, though in the end the bulls were able to record a modest win, helped by Friday’s report on the labor market for the month of April. For the five-day stretch, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index were up 0.3%, 0.9%, and 0.6%, respectively.
Last week did not get off to a flying start, with the major averages not able to push forward. The earnings news, which has been mostly supportive during the first-quarter reporting season, pressured stocks a bit early in the week. Some of the bigger names that failed to impress Wall Street were Pfizer (PFE - Free Pfizer Stock Report), Apple (AAPL - Free Apple Stock Report), and Facebook (FB), with each of the industry titans giving back a few points after releasing quarterly results. The earnings data, though, was offset by encouraging economic data, including the latest figures on manufacturing and nonmanufacturing activity as well as employment. The solid results from the business beat, along with the Federal Reserve’s decision to hold interest rates steady last week, provided enough support for equities. On the employment front, the nation added 211,000 in April, which exceeded expectations and was a significant improvement over 79,000 nonfarm payroll total for March. For the day, the Dow 30, the NASDAQ, and the S&P 500 Index added 55, 25, and 10 points, respectively, the biggest one-day move last week. The buying was led by the energy and materials sectors. Conversely, the day’s biggest laggard was the healthcare group.
The weakness in the healthcare sector was a reaction to the news that President Trump and the Republican-led House of Representatives’ plan to repeal and replace the Affordable Care Act had garnered enough votes in the House to move the legislation onto the Senate. This news weighed on the healthcare sector, with the stocks of the hospitals, managed care providers, and the pharmaceutical companies weakening. The healthcare battle between Democrats and Republicans on Capitol Hill has the makings of a long, drawn-out process. This may make for a volatile performance for the healthcare issues in the coming months.
Looking at the new trading week, the world’s equity markets are off to a mixed start. The main indexes in Asia finished mostly higher overnight, while the European bourses are lower as trading moves into the second half on the Continent. European investors are digesting the results of yesterday’s Presidential election in France. Specifically, centrist candidate Emmanuel Macron easily defeated far-right candidate Marine Le Pen. The outcome likely reaffirms France’s commitment to the European Union. If Miss Le Pen would have won, she promised to put France’s EU membership to a referendum, which would have roil the markets. Nonetheless, that was clearly looking like a long shot heading into yesterday’s vote. But even though the outcome appears to be the most favorable one for stocks going forward, we are seeing some selling in Europe, where the stock markets moved higher in the weeks leading up to France’s election. We think it may be the classic case of “buy the rumor, sell the news” in Europe today.
Turning back to our shores, the first-quarter earnings season is starting to wind down, but that is not to say it is all quiet on that front. Headlining the earnings schedule is the latest quarterly report from Walt Disney (DIS - Free Disney Stock Report) after the close of trading tomorrow afternoon. The entertainment giant is the only Dow-30 company to report earnings this week. Likewise, it will be a more subdued week on the business beat, with the only notable reports coming late in the week on consumer and producer prices and retail sales. The lighter news from the economic and earnings beats may push the attention of the investment community toward Washington D.C. early in the week. Healthcare and tax reforms are the two biggest political events that Wall Street is interested in these days.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are presaging some modest selling for the U.S. market. Much like their European counterparts, the major U.S. equity indexes are looking like the victim of some selling on the election results in France. The major U.S. equity averages got a big boost a few weeks ago when it started to look like Mr. Macron was going to be the next President of France. Stay tuned. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
