After the Close
The stock market got off to a weak start this morning, moved sharply lower in the early afternoon, but managed to partially pare its losses later in the session. At the close of trading, the Dow Jones Industrial Average was down 168 points; the S&P 500 Index was off 21 points; and the NASDAQ was lower by 90 points. Market breadth was quite negative, as losers easily outpaced winners on the NYSE. From a sector perspective, the technology and consumer non-cyclical names declined considerably, while the energy and financial issues managed to display some relative strength.
Meanwhile, today’s economic news was somewhat encouraging, and did not likely contribute to the market selloff. Specifically, according to the final estimate, the nation’s GDP rose at annualized rate of 1.4% during the first quarter, which was a little better than expected. Meanwhile, initial jobless claims came in at 244,000 for the week of June 24th, also meeting the consensus view. Tomorrow we will get a look at personal income and spending levels for the month of May, the Chicago PMI for the month on June, and a report on consumer sentiment from the University of Michigan.
In the corporate arena, shares of Walgreens Boots Alliance (WBA) rose modestly after the drugstore operator reported solid results. Further, the company announced that it was calling off its proposed merger with Rite Aid (RAD), sending that stock sharply lower. We also heard from Constellation Brands (STZ). Shares of the beverage maker rallied in response to an encouraging release. After the closing bell today, Nike (NKE - Free Nike Stock Report) and Micron (MU) weigh in with their numbers.
Technically, the stock market has been exhibiting some volatility over the past few days. Traders seem to be in need of some direction at this point. Perhaps, the second-quarter earnings season, which will commence shortly, will shed some light on the situation. – 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 - 11:40 AM EDT
Following a major setback on Tuesday and a big comeback yesterday, the bulls sought to make it two in a row this morning. And with a nice upward revision in first-quarter GDP and a strong surge by the bank stocks after getting a good report card from the Federal Reserve late yesterday, such a solid showing appeared reasonable to expect. And initially, there was some buying. But the flame went out for the bulls very quickly, and before an hour had passed, the stock market had a decidedly lower look to it. This downtick persisted into the middle-to-late stages of the morning.
Meanwhile, the bank stocks continued to press forward, with early gains of more than 1% among the larger players in that sector. The Fed's blessing in the so-called stress tests meant that major stock buybacks and formidable dividend increases could now be implemented. JPMorgan (JPM - Free JPMorgan Stock Report), in fact, announced its biggest share buyback program since the financial crisis of late last decade. Other banks followed suit. Still, even with the good performance from the banking sector, including a 2% gain in JPMorgan shares, the Dow still was off some 35 points after the first hour of trading.
The weak market undertone, which also took in the S&P 500 Index, the S&P Mid-Cap 400, and the small-cap Russell 2000, primarily was driven by another serious setback in the tech-driven NASDAQ, which was off some 70 points in mid-morning dealings on pullbacks in some notable large-cap equities in that space. All the while, oil continued to gain; weekly jobless claims came in quite low (ticking up just nominally), and first-quarter GDP's final revision showed an increase of 1.4%, up from the prior month's 1.2% estimate and a similar expectation. Late next month, we will get the initial look at second-quarter GDP.
In other news affecting early trading, giant drugstore chain Walgreens Boots Alliance (WBA) announced it was no longer considering the purchase of troubled competitor Rite Aid Corp. (RAD). Shares of the former edged up on the news, while Rite Aid stock tumbled, losing more than 25% of its value at the low point of the morning. The latter must now face its problems on its own, unless it can secure another partner. Overall, then, the stock market was lower as the morning progressed, with this back-and-forth pattern not helpful in building much confidence.
As we head toward the lunch break, all the averages are lower, with the Dow off 65 points; the S&P 500 down 13 points; and the tech-laden NASDAQ in the red by a staggering 83 points. Elsewhere, seven of the 10 equity groups that make up the S&P groupings are lower, with strength limited to the financial, energy, and basic materials sectors. Technology, by contrast, is off almost two percent. Also, losing stocks hold a comfortable, but not dominant, four-to-three advantage on the Big Board. So, it looks as though the bears will control the agenda today. 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.
Before the Bell
What a difference a day makes. On point, less than 24 hours before the stock market opened for trading yesterday, Wall Street, under pressure from a marked selloff in technology issues, and concerned about a delay in bringing the revised GOP health care package to a Senate vote, saw equities falter badly, with the Dow Jones Industrial Average fading by 99 points and the tech-driven NASDAQ declining by just over the century mark. However, as suggested, yesterday was a new day, and the fears engendered by the ill tidings in Washington seemed to fade rather quickly.
So, stocks rallied as Wall Street managed to fashion a wire-to-wire win. The gains began at first blush, with the Dow quickly moving out to a triple-digit point advance, while the NASDAQ sputtered at first on some early large-cap technology hits. But that choppiness proved short-lived. And as the morning proceeded, the gains became more uniform, with the advance-decline breakdown showing more than four stocks up for every one down on the Big Board. Also, all 10 of the leading equity groups were in the plus column, as the financial stocks and the basic materials groups led the way.
Helping the early surge higher, the Dow eventually stepping out to a morning-best gain of some 160 points, were notable surges in the banking stocks. Among the Dow-components, investment banking behemoth Goldman Sachs (GS -Free Goldman Sachs Stock Report) was a big contributor, as was entertainment mainstay Disney (DIS - Free Walt Disney Stock Report). Also, as the day progressed, the earlier selling in the tech group subsided, with some stocks in that critical category rallying nicely. This gain was achieved in spite of some cautionary economic data, as mortgage applications fell six percent last week, while pending home sales eased for a third straight month in May, due to short supply.
But as the pending home sales shortfall was brought on by a supply shortage, not a paucity in demand, the perception remained that the housing market was still strong. Thus, the news did not rattle investors, who must yet grapple with a delay in revising the nation's health care laws. As things stand now, a vote to approve the Administration's initiatives in the Senate will be put off until after the July 4th break, with an expensive lobbying effort now likely to get into motion over the next fortnight. The importance of revising the Affordable Care Act is that a major tax reform package may not move along until this issue is resolved.
Still, for one day, at least, the focus of the Street turned away from Washington and back onto the economy and hopes for the start of a summer rally. And for one day at least, expectations that a summer advance was viable remain securely in place. Of course, with a mixed outlook for the economy, some other catalysts will be needed, starting with earnings reporting season, which will be firmly under way within a fortnight. Here, expectations are upbeat, for the most part. Sooner or later, though, we probably will need an assist from the political arena.
Meanwhile, the buying persisted into the close, and although the Dow and the S&P 500 closed somewhat off of their intraday highs, the NASDAQ, which approached the starting gate hesitantly, led the way as the final minutes of trading arrived. In all, that tech-led composite added 88 points; the Dow contributed 142 points; and the S&P 500 Index jumped 21 points. A modest rebound in oil, as the government reported some constructive results on weekly inventories, helped the broad advance, which took in most groups and many more stocks than not. Also helping was optimism about the future of the banking group.
Looking ahead to the new day, we note that stocks in Asia were higher overnight, while in Europe, the major bourses are mixed at this early hour. Meantime, oil is up for a sixth straight session; Treasury yields, which climbed yesterday, are heading up a bit again; and gold is inching lower. As to our futures, yesterday's solid rebound is not lifting sentiment this morning, so our market trends are suggesting an uneven opening when trading resumes. Finally, in economic news, the Commerce Department has just released data showing that revised first-quarter GDP gained a better-than-expected 1.4%. (Consensus had been 1.2%.) The increase in GDP in the period primarily reflected positive contributions from nonresidential fixed investments, exports, and consumer spending. Please note that this is the final revision for that key metric. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
