After the Close
The U.S. stock market moved nicely higher today, with notable strength in the afternoon. At the close of trading, the Dow Jones Industrial Average was ahead 66 points; the S&P 500 Index was up 13 points; and the NASDAQ was higher by 41 points. Market breadth showed widespread support for equities today, as winners were well ahead of losers on the NYSE. All of the major stock market sectors made progress, with sizable gains in the energy and basic materials issues. While still up for the day, the telecommunications issues posted more modest gains.
Meanwhile, traders received one key economic report this morning. Of note, housing starts rose to an annualized rate of 1.2 million units, during the month of June. Building permits, which are a leading indicator, also achieved progress during the month. Elsewhere, according to the EIA, crude oil inventories declined by 4.7 million barrels during the week of June 15th; this may explain the increase in energy commodity prices today.
The second-quarter earnings season is now in its initial stages. Over the past 24 hours we heard from a few leading companies. Specifically, shares of International Business Machines (IBM – Free IBM Stock Report) moved lower today after the technology giant delivered a lackluster report. Things went a bit better for Morgan Stanley (MS), as shares of the financial services company stock rose in response to an encouraging release. After the today’s closing bell Qualcomm (QCOM) and American Express (AXP – Free American Express Stock Report) weigh in with their numbers.
Technically, equities have been charging ahead, bringing the S&P 500 Index (now at 2,474) to new high ground. Pushing the broader average past the 2,500 mark, will be a key challenge for the bulls. – 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 - 11:45 AM EDT
The U.S. equity market got off to a good start this morning, with the tech-heavy NASDAQ and the broader S&P 500 Index setting all-time highs in the process. The Dow Jones Industrial Average, hurt by a negative reaction to International Business Machines’ (IBM - Free IBM Stock Report) latest quarterly data, is in positive territory, but trailing the other two major averages. Overall, there is a bullish tone on Wall Street, with advancing issues leading decliners by a notable margin on both the New York Stock Exchange and the NASDAQ.
The 10 major equity groups also are painting a bright picture, with all of the sectors in positive territory. The leadership is coming from the healthcare, technology, and basic materials areas. In the healthcare space, the biotechnology stocks are surging, while the technology group is shaking off the aforementioned IBM earnings news and forging further ahead. Not surprisingly, given the healthcare and technology gains, the NASDAQ is at record levels. The consumer cyclical stocks also are getting a boost from the housing and residential construction-related issues, which are up on some strong data on homebuilding.
Indeed, the Commerce Department reported that housing starts came in at a seasonally adjusted annualized rate of 1.22 million, which was 8.3% higher than the upwardly revised May figure and 2.1% above the prior-year tally. The revised May figure also eased fears that the housing recovery had stumbled in the spring season. And even more encouraging, homebuilders applied for more permits to construct homes, a good signal of increased building activity in the coming months. Building permits came in at an annualized pace of 1.25 million, up 7.4% sequentially and 5.1% higher year over year.
Meantime, we received a number of important earnings reports since the close of trading yesterday. The data have made for a mixed reading at best. On the negative side, shares of IBM are trading lower after the technology behemoth reported its 21st consecutive revenue decline in the second quarter. Likewise, shares of United Continental (UAL) are lower after the company beat estimates, but the investment community was disappointed by its weaker guidance. Conversely, the stock of investment banking giant Morgan Stanley (MS) is higher after the company reported strong quarterly results. The Morgan Stanley earnings, along with the non-earnings news that Discovery Communications (DISCA) is reportedly in merger talks with Scripps Networks Interactive (SNI), is giving a boost to equities this morning.
Looking ahead to the second half of the session, it appears that the bulls may be tough to beat. As noted, the spread between winning and losing issues is wide on both the Big Board and the NASDAQ. Too, the small- and mid-cap sectors, which tend to lead the direction of the market, are nicely higher. Oil prices are higher this morning on a draw down in oil inventories in the latest week, which is helping the energy stocks. Moreover, the S&P 500 Volatility Index (or VIX), also known as the “fear gauge,” is down again today (falling below 10), indicating that investors continue to throw caution to the wind despite stretched stock valuations and political dysfunction in Washington. Adding all these factors up, it suggests that the bears will have their work cut out for them if they plan to turn the tide of trading on Wall Street this afternoon. 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 stock market, following an indecisive start to the week on Monday, looked poised to press higher yesterday--or at worst mark time once again. And, in fact, the equity futures were showing little change several hours before the start of trading on our shores. Then, in some apparent rethinking, the bears started to flex their muscles. This shift was not dramatic at first, and there was no wholesale selloff of stocks through much of the morning, but there was some movement lower from the start. However, the impetus was not earnings season, which now is under way, but rather the dysfunction in Washington, which has taken a turn for the worse.
Specifically, the bears resurfaced following news that the Republican leaders in the U.S. Senate had decided to abandon their health care bill, which was designed to repeal and replace the Affordable Care Act (ACA). The reason is that two more GOP Senators had gone on record with their intention to oppose the measure. That would leave the Senate Republicans two votes short of the 50 needed for approval. And without a new health care bill, efforts at tax reform--a key part of the bull market story--would be that much harder. So, stocks wilted and fell, even with no worse than a mixed early showing on the corporate earnings front.
As noted, stocks pulled back, and the situation worsened as the morning progressed, with the Dow Jones Industrial Average falling to a morning-worst loss of almost 160 points before some subsequent buying surfaced to pare the deficit. For the moment, at least, earnings are taking a back seat to Washington. Interestingly, it was mostly the Dow that fell back, as the NASDAQ, on comparative strength in the technology group, managed to hold with just modest losses. As for the Dow, it was also influenced by a drop in the shares of Goldman Sachs (GS - Free Goldman Sachs Stock Report), as the financial services giant reported a drop in bond trading revenues.
In other news, it figures to be a relatively quiet week on the economic front, following a busy five-day stretch in the most recent week. Still, the past few minutes has seen the release of key data on housing starts. On point, after falling back in May, housing starts rebounded strongly in June, with homebuilding rising 8.3%, to 1,215,000 annualized units. That compared with the 1,122,000 homes started in May, and the 1,190,000 of housing under construction in June of 2016. Further, building permits also jumped, rising 7.4% to an annualized rate of 1,254,000. This good news counters some less-than-compelling metrics issued earlier this month, most notably on retail spending.
Meanwhile, the Dow's loss continued to ease into the lunch hour as a one-time near 160-point deficit was cut in half as the noon hour arrived. The S&P 500 Index's loss was minimal at that time, while the NASDAQ was in the black. However, the S&P Mid-Cap 400 and the small-cap Russell 2000 both were moderately lower at that time, while declining issues held a formidable three-to-two lead on advancing stocks. As we entered the afternoon, then, it looked as though we would remain in the loss column throughout the day's session.
The stock market continued to press lower as the afternoon moved along, but the deficit on the Dow gradually eased as the session proceeded, even though a proposal to just repeal the ACA failed as a third GOP Senator voiced her opposition even before a vote could be taken. So, it is back to the drawing board, it would seem, and that is not good news for those advocating a tax reform program or infrastructure spending increases. This further news, however, did not rattle investors, and the market continued to improve selectively into the close.
When the final numbers were in, the worst morning's setback had been overcome, with the Dow cutting its loss by some two-thirds to end matters off just 55 points. The S&P 500 Index managed to end on the plus side of the ledger, if incrementally, while the NASDAQ inked a 27-point increase. Just modest losses were tallied by the smaller composites, as losing stocks, once well ahead of winners, were just narrowly in the lead on the Big Board.
Looking ahead now to a new day, we see that stocks were higher across Asia overnight, while in Europe, the bourses are posting early gains in dealings thus far this morning. In other markets, oil is trickling higher; metals prices are flat; and Treasury yields are up nominally. U.S. equity futures, meantime, are pointing to a stronger start following yesterday's modestly lower close, with gains most likely on the NASDAQ. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
