After the Close
The U.S. stock market delivered a somewhat directionless, and ultimately mixed, performance today. At the close of trading, the Dow Jones Industrial Average was down 29 points; the S&P 500 Index was off nominally; and the NASDAQ was higher by five points. Market breadth showed a divided session, with advancers just about even with decliners on the NYSE. Leadership was found in the healthcare and telecommunications names, which offset weakness in the industrials and basic materials issues.
Meanwhile, there were a few economic reports released this morning. Specifically, initial jobless claims declined to 233,000 during the week of July 15th, where analysts had been looking for a less favorable reading. In addition, the Index of Leading Economic Indicators Index increased 0.6% in June, which was slightly better than had been anticipated. Of note, the index, which is used to forecast the economic outlook, has been holding up well over the past several months. Finally, the Philadelphia Fed’s latest survey of business conditions in the mid-Atlantic region, delivered a reading of 19.5 for the month of July, which was a bit lighter than analysts had expected. Tomorrow no major economic news items are scheduled to be released.
Wall Street has been carefully watching the second-quarter earnings season unfold. Over the past 24 hours we have heard from a number of companies. Specifically, shares of American Express (AXP – Free American Express Stock Report) slipped in price, as investors were unimpressed with the financial giant’s latest numbers. Further, Phillip Morris (PM) moved lower in response to a weaker-than-anticipated report. Today’s somewhat lackluster reports may have contributed to the market’s soft tone. After the closing bell we hear from Microsoft (MSFT – Free Microsoft Stock Report) and Visa, Inc. (V – Free Visa Stock Report).
Technically, equities continue to hold up well, as investors weigh political concerns and tighter monetary policy against a reasonably solid corporate outlook. It is likely to early to tell if the second-quarter earnings season will be strong enough to spur on the bulls and 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 - 11:45 AM EDT
The majority of U.S. stocks traded higher in the first 90 minutes of Thursday’s session, led by early momentum in the energy and healthcare sectors. The indexes, fresh off of setting record intraday highs on Wednesday, were more mixed. While the S&P 500 and NASDAQ reached new peaks during Thursday’s opening minutes, the Dow Jones Industrial Average has been dragged down by Home Depot (HD - Free Home Depot Stock Report) and Travelers (TRV - Free Travelers Stock Report). While the latter’s market value was challenged by a disappointing earnings release, the former’s decline is more nuanced. The retailer’s shares are likely being pressured by the announcement of, and subsequent surge of optimism for, Sears Holdings’ (SHLD) deal to sell appliances outfitted with Amazon’s (AMZN) Alexa technology.
While profit taking undoubtedly played a large role in the early-morning decline, as investors pare gains after the aforementioned record setting, the political arena was responsible for some of the day’s unevenness. A new development in the investigation into the Administration’s ties to foreign governments suggests the President’s family and their finances are subject to questioning. Though the presumed outcome of the inquiry is uncertain, the market is exhibiting a bipartisan concern that persistent distractions may end up delaying the implementation of key economic initiatives. With infrastructure, deregulation, and, most important, tax reform prospects playing a central role in the post-election rally, the Administration may need to accelerate its efforts before next year’s midterm election season begins in earnest.
Meanwhile, U.S. crude oil has enjoyed a modest runup in market value. Brent crude crossed the $50 per-barrel threshold for the first time since early June, extending the rally spurred by yesterday’s report that U.S. inventories are declining. The recent optimism will be challenged, however, when OPEC meets next week. The cartel has struggled to curb production from its member and allied nations, with Nigeria and Libya being the most recent outliers. While the week-long rally has been impressive, and welcome, there are plenty of challenges on the near-term horizon that we think will reaffirm the oil market’s bearish undertone.
Midway through the morning, after each of the three indexes had fallen sharply from opening levels, the averages were showing signs of a comeback. The NASDAQ and S&P 500, in fact, had bounced back above their respective breakeven lines, before easing back subsequently. With a spate of earnings reports set to be released in the late afternoon, and a relatively positive output so far in the season from Corporate America, we expect the bulls to challenge the profit takers until the closing bell. Investors will be given quarterly updates from Dow components Microsoft (MSFT - Free Microsoft Stock Report) and Visa (V - Free Visa Stock Report), which could help to turn the blue chip grouping’s fortunes around tomorrow morning. Stay tuned. – Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before the Bell
The stock market, which had come back strongly with the help of a late buying surge on Tuesday, began yesterday's session in mixed fashion. On point, the NASDAQ, a sizable winner the day before on strength in technology, began the latest trading day with solid gains once more, while the Dow Jones Industrial Average, a 55-point loser on Tuesday, again worked its way lower initially. The problem on the Dow was a disappointing performance from technology giant IBM (IBM - Free IBM Stock Report). That stock weighed heavily on the Dow, surrendering more than 4% early in the day, and costing some 45 points on that 30-stock composite.
The problem with IBM was another revenue shortfall, the 21st straight revenue setback for that technology bellwether. Sales for the company also missed consensus estimates. Although much of the sales shortfall was currency related, the corporation did not have much of an increase even on a currency neutral basis. Elsewhere, most of the Dow was higher and the index, overall, had pushed moderately into the black as we passed the one hour trading mark. Record highs, meanwhile, were posted by the Standard and Poor's 500 Index and the NASDAQ. Sizable increases also were tabulated by the smaller-cap composites in a broad early advance.
The stock market continued higher as the morning progressed, boosted by a better-than-expected performance by the housing sector. Specifically, the Commerce Department reported at 8:30 AM (EDT) that housing starts had risen nicely in June, gaining 8.3% from the month before, to an annualized rate of 1,215,000 units. Also, and perhaps more important, as they are more of a leading indicator, building permits rose solidly, advancing 7.4% to an annualized rate of 1,254,000 homes. Both starts and permits were above the prior month totals, as well as the year-earlier figures, attesting to the staying power of this core market.
So, stocks continued to hold their own into the lunch hour, with modest increases the rule for the Dow and the S&P 500 and a more substantial uptick in place for technology-driven NASDAQ. Helping the market, in addition to the economy, were some other, more positive quarterly performances, notably from Morgan Stanley (MS), which reported better-than-expected quarterly earnings. That stocks was up nicely, in contrast to IBM. Finally, the market was holding its own in the early trading hours in spite of dysfunctional political situation in Washington, which is reeling from the failed attempt to repeal and replace the Affordable Care Act.
The stock market, up broadly and across all lines in the morning, continued its advance into the afternoon, with investors apparently focusing more on the earnings outlook (where a comfortable majority of companies are topping expectations thus far) than on the continuing dysfunction in politically charged Washington. Prices then furthered their advance somewhat into the middle of the afternoon, with the NASDAQ climbing to a gain of better than 40 points, approaching 6,400 in the process. The Dow, too, made strides, in spite of the ongoing drift lower by the aforementioned IBM.
The midweek market advance then stayed intact as we drifted toward the day's close. In fact, there was some strengthening as the session wound down, with the Dow and the S&P 500 both moving higher, while the NASDAQ retained its proportionate lead among the larger-cap indexes. The S&P Mid-Cap 400 also shot ahead, winding up matters with a gain of more than one percent. Still, the early weakness in IBM persisted into the close. At the conclusion of the day, the Dow's gain, boosted by late buying, was 65 points. Leading the way forward were the basic materials stocks, such as the fertilizers and the steels.
Looking out to a new day, now, and peering across to Asia were higher in overnight dealings, while in Europe, the major bourses are looking stronger, as well. Also of note, oil is trading relatively flat, even after a big drawdown in crude stocks; gold is off slightly; and Treasury yields are mixed. Finally, our futures are now suggesting a higher opening when trading resumes later this morning, and ahead of a slew of earnings reports, headlined by results from software giant Microsoft (MSFT - Free Microsoft Stock Report). – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
