After the Close
The U.S. equity markets started off the day with a modest uptick, but trading was mixed, at best, throughout the session.
On the economic front, today’s news was largely favorable. Notably, retail sales for July were up 0.6%, which was better than consensus estimates and the best showing this year. However, the government report provided little solace to investors in Advance Auto Parts (AAP), Dick’s Sporting Goods (DKS), and Coach (COH) whose shares all got hammered today on disappointing earnings. Even shares of Home Depot (HD - Free Home Depot Stock Report) receded a couple of percentage points, despite better-than-expected financial results and an upwardly revised outlook.
As the closing bell approached, all three of the major indexes had rallied to around the breakeven mark. By the numbers, the Dow Jones Industrials were faring the best of the lot with a gain of five points. The broader S&P 500 Index was down one point, while the tech-heavy NASDAQ was off by seven.
From a sector perspective, it was an even split between winners and losers among the 10 leading groups. Consumer non-cyclicals led the gainers, rising about half a percent, while technology and utility issues weren’t too far behind. In the loss column, consumer cyclicals, energy, and telecommunications stocks each shed about half a percentage point. Altogether, market breadth was negative on the session, with declining issues leading advancers by a good margin on all three major exchanges.
Trading in the European bourses was decidedly more positive. The U.K.’s FTSE and France’s CAC-40 spent the entirety of the session in the green, each ending the day ahead by about one-third of a percentage point.
Meanwhile, Germany’s DAX recovered from a late-session drop to end up slightly. – Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:10 PM EDT
Stocks are putting in a mixed-to-weak showing today, as traders digest the latest batch of corporate profit reports. At just past noon in New York, the Dow Jones Industrial Average had turned lower, and is off roughly seven points; the broader S&P 500 Index is down nominally; and the NASDAQ is lower by nine points. Market breadth is clearly negative, with declining issues leading advancers by a sizable margin on the NYSE. From a sector perspective, select consumer and technology names are making progress, while the energy and basic materials issues are weighing on the market.
Elsewhere, today’s economic news was largely supportive. Specifically, retail sales increased 0.6% in the month of July, which exceeded analyst expectations. Of note, the monthly core number (excludes auto sales) was also encouraging. Elsewhere, business conditions in the greater New York region have been holding up well, as the Empire Manufacturing Survey provided a reading of 25.2 in August, which represented a healthy improvement. Finally, business inventories rose slightly in June, indicating a positive outlook. Tomorrow, housing starts and building permits for the month of July are scheduled to be released. Further, in the afternoon, the FOMC will publish the minutes from its latest meeting.
Finally, a number of large retailers weighed in with their numbers recently. Specifically, shares of Home Depot (HD – Free Home Depot Stock Report) are trading sharply lower today, even though the building supply giant posted improved results. Meanwhile, shares of Coach (COH) are sinking, as investors seemed concerned about the apparel company’s top line. Shares of Advanced Auto Parts (AAP) are also plunging in response to a weak issuance. It should be noted that investors may also be growing worried that auto parts will be more widely sold online in the future, making it hard for traditional operators.
Technically, stocks retreated last week mostly on disturbing news from North Korea, and yesterday rebounded nicely on a lessening of tensions in that part of the world. However, we will need to see some follow-through if the market is to meaningfully resume its advance. – Adam Rosner
At the time of this article’s writing, the author had a position in Coach (COH).
Before the Bell
Following the second worst trading week of the year during the most recent five-day span, an apparent diminution in tensions between the United States and North Korea, enabled the stock market to get off to a roaring start to begin the new week yesterday. In all, and on the heels of this quieter news background off shore and strong stock market performance in Asia overnight on Sunday and Monday morning in Europe, Wall Street got off to a booming open and continued to advance during the morning.
In all, the Dow Jones Industrial Average, which had backed off notably last week to close below 22,000, started off with a burst of energy, climbing quickly to a gain of better than 150 points before the morning had concluded. The market's morning surge pushed the blue-chip composite past 22,000. The tech-laden NASDAQ, with a morning gain of more than 75 points, was showing a proportionately bigger advance. This comeback by the market evolved with oil off a few pennies and no other domestic events of note occurring as Treasury rates were little changed.
So, as the morning concluded, there was strength across the board, with all 10 equity groups nicely higher, led by the tech and industrial sectors, while gaining stocks held a formidable five-to-one lead on declining issues on the Big Board and a likewise appreciable three-to-one advantage on the NASDAQ. So, as we moved into the afternoon, the market seemed focused on one thing, namely the lowering of temperatures on the geopolitical front. With the major news items for the economy in the books for this month, the focus is now on global events. So, the relief about North Korea is clearly giving the Street a big lift.
The equity market then continued to head higher into the early afternoon, and it was a broad advance with both the large- and small-cap indexes fully participating. Advances, in fact, were across the board, while the VIX, or the fear gauge, up sharply last week, contracted by some 20% in early dealings yesterday. The stock market would stay range-bound into the late stages of the afternoon. As had been the case earlier, the Dow lagged the S&P 500 and especially the NASDAQ.
This pattern then held into the close, with the blue-chip index, once up by just over 160 points, ending matters with a gain of 135 points. The S&P 500, meantime, concluded the day ahead 25 points, while the NASDAQ was better by 84 points, on that strength in technology. As to the groups, nine of the 10 leading sectors were higher, but energy fell modestly. Weakness in that sector, meanwhile, held the Dow back a bit. All in all, however the first session of the new week was a stellar one.
Looking ahead to the rest of the week and to today's session, the economy will come into view, as data on housing starts and building permits (tomorrow), industrial production and factory use (Thursday), and consumer sentiment (Friday) will make their presence felt. Expectations are for mixed to better results. As to action today, stocks in Asia were higher in overnight trading, while in Europe so far this morning, the markets are also up. Also, oil is down a bit; gold, a loser yesterday, is lower again on easing geopolitical concerns; and bond yields are up. Finally, U.S. equity futures are trending higher ahead of this morning's opening. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
