After the Close
Equities put in a weak performance this morning, but managed to firm up as the day progressed. The volatility may have had to do with the fact that traders, while watching the second-quarter earnings season unfold, were also distracted by the latest political developments in the health care arena. At the close of trading, the Dow Jones Industrial Average was down 55 points; while the S&P 500 Index was ahead slightly; and the technology-laden NASDAQ was higher by 27 points. Market breadth was mixed, with advancers about even with decliners on the NYSE. From a sector perspective, the technology and utility stocks displayed leadership, while the industrials and the basic materials issues retreated.
Meanwhile, traders received just a few economic news items this morning. Of note, export and import prices were little changed during the month of June, suggesting that inflation is probably not yet a concern. Elsewhere, the National Association of Home Builders (NAHB) Market Index delivered a reading of 64 for the month of July, where a slightly higher figure was expected. Tomorrow we will get a look at housing starts and building permits for the month of June. Modest increases are expected. In addition, the EIA will report the latest weekly crude oil inventory numbers.
As the second-quarter earnings season is now in under way, a number of leading corporations weighed in with their financial reports over the past 24 hours. Yesterday afternoon we heard from Netflix (NFLX). This morning we received reports from Johnson & Johnson (JNJ - Free Johnson and Johnson Stock Report), Bank of America (BAC), UnitedHealth Group (UNH - Free UnitedHealth Stock Report), and Goldman Sachs (GS - Free Goldman Sachs Stock Report). After the market closes today, International Business Machines (IBM - Free IBM Stock Report) posts its numbers. The numerous earnings reports coming out on a daily basis over the next few weeks clearly will be influencing market sentiment. Of importance will be the guidance being offered by many of the companies, especially given that the stock market has been trading at elevated multiples.
Technically, equities have been quite resilient lately. While there are areas of concern, the corporate outlook remains encouraging and that seems to be enough to keep the bulls engaged. – 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 - 12:30 PM EDT
Wall Street began the day to the downside, moving sharply lower in mid-morning. But trading has been more mixed as we pass the noon hour in New York. Earnings season is now in full swing, with a bevy of high-profile names reporting this week. With expectations high, disappointments are likely to be magnified. To wit, Goldman Sachs (GS -Free Goldman Sachs Stock Report) shares fell 2.8% after the investment bank reported a decline in its trading business. Meanwhile, Bank of America (BAC) had a better-than-expected quarter, with notable strength in its consumer banking business. However, this was apparently not good enough, as its stock slid as much as 1.7% in early trading. Elsewhere, UnitedHealth Group (UNH - Free UnitedHealth Group Stock Report) weighed in with earnings that topped expectations; however its shares fell after a vote on a new healthcare bill was abandoned. Conversely, earnings at Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report) were also better than expected, and improved earnings guidance helped lift its shares.
Later today we’ll be hearing from International Business Machines (IBM - Free International Business Machines Stock Report), followed by Alcoa (AA) and American Express (AXP - Free American Express Stock Report) tomorrow, and Microsoft (MSFT - Free Microsoft Stock Report) on Thursday. On the economic front, we will be getting figures on homebuilding Wednesday, followed by jobless claims and leading indicators on Friday.
As of noon in New York, the Dow Jones Industrial Average, after plummeting by as much as 158 points (weighed down by the aforementioned declines in UnitedHealth and Goldman), had pared its loss to 84 points. The broader S&P was near its peak for the day, down just two points. Meanwhile, the tech-heavy NASDAQ was faring the best of the lot, having pushed its way to 11 points above breakeven.
Taking a look at the major market sectors, most are in the red with the notable exception of the technology and utility issues, both ahead by about a quarter percent. Basic materials and financials have been the laggards. Elsewhere, gold and oil are both up around half a percentage point in price today. Most of the uptick in the latter appears to reflect a weaker dollar and speculation that Saudi Arabia is mulling over additional cuts, amid word that Ecuador will be upping production due to financial shortfalls and indications that U.S. output will also continue to rise.
Turning to the key European bourses, stocks peaked early in the session and traded steadily lower as the day wore on. Germany’s DAX and France’s CAC-40 were the hardest hit, each shedding more than a percentage point. But London’s FTSE managed to pare its losses to less than a quarter percent. – Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before the Bell
Wall Street waltzed into the new week with plenty of momentum, following a strong close to the latest five-day span and ahead of the full-fledged start of earnings season. Expectations for this quarterly event are high, and with multiples extended, the economic fundamentals mixed, and uncertainty reigning in Washington these days, a good reporting season is probably a must to keep the stock market, fresh off records in the Dow Jones Industrials and the Standard and Poor's 500 Index, pressing still higher.
However, at the outset of the latest session, the stock market, which has made a habit recently of rising nicely on most Mondays, pretty much marched in place. On point, through much of the morning, the Dow was off marginally, while the S&P 500 and the NASDAQ were modestly higher in advance of earnings. As for the economy, following a week in which there was a succession of mixed data, including stronger results on industrial production and factory use and weaker metrics on retail sales, we will be getting figures on homebuilding tomorrow.
This unimposing pattern then continued into the last part of the morning, when just around noon in New York, the Dow nudged into the black, while the other large-cap indexes held nominal gains. Boosting the market modestly was a report showing that China's economy had expanded by 6.9% in the second quarter, which was better than expected. Meanwhile, in other news on this early flat-line session, oil was off a few pennies a barrel; gold was fairly flat; and Treasury yields had ticked down slightly.
A holding pattern then evolved during the afternoon, as Wall Street awaited a slew of earnings reports this week from mostly larger companies, which tend to report early in the cycle. Among the high-profile names set to release results this week is Dow-30 component Microsoft (MSFT - Free Microsoft Stock Report). Overall, expectations are high and the flat performance through most of the session yesterday reflects the Street's caution ahead of the heavy pace of reports that will have a major impact on the market's showing in the weeks to come.
The afternoon's windup brought few changes of note, with the indexes staying range-bound through the conclusion of trading. All the while, the Dow raced ahead to yet one more intraday all-time high, and the NASDAQ pressed forward for a seventh straight gain. As the final bell sounded, the Dow was off eight points; the S&P 500 was flat; and the NASDAQ was ahead just two points. The small-cap Russell 2000 also hit a record high and ended matters ahead by three points, as more stocks gained than declined on the day.
Looking out to a new day now, we see that stocks in Asia were lower overnight, following the news that the GOP had abandoned its efforts to repeal and replace the Affordable Care Act at this time, while on the Continent, the principal European bourses are now lower on concerns about the health care agenda in the United States. Also, oil, flat yesterday, is up so far this morning on word that Saudi Arabia may be considering deeper cuts in output; gold, likewise range-bound in the latest session, is higher in early dealings this morning; and Treasury yields are down modestly.
Finally, as investors await a new day and no shortage of earnings reports, our futures are showing some early losses, as the flood of second-quarter earnings comes in. So, we could begin the day with some modest losses in our markets. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
