After The Close
The stock market opened sharply higher this morning, but pulled back selectively as the afternoon progressed. The initial move up today was likely fueled by some positive corporate profit reports, as well as hopes that an upcoming meeting between the United States and China, our largest trading partner, will lessen recent trade spats. At the close of the session, the Dow Jones Industrial Average was ahead 396 points; the broader S&P 500 Index was up 22 points; and the NASDAQ was higher by 32 points. Market breadth was positive, with winners easily outpacing losers on the NYSE. All of the major equity groups forged ahead, with substantial gains in the telecom and non-cyclical consumer names. Of note, the technology stocks made progress today, too, but at a more moderate pace.
Meanwhile, there were a few economic news items released this morning. Specifically, housing starts came in at annualized rate of $1.17 million units during the month of July, which fell a bit short of analyst expectations. The report may have some on Wall Street concerned that rising costs for materials and labor could create pressures for the housing market. Elsewhere, the nation’s employment situation remains a bright spot, as initial jobless claims for the week of August 11th, moved down to the 212,000 mark. Tomorrow, the Conference Board releases its leading indicators report for the month of July.
In corporate news, a number of widely held companies posted results over the past 24 hours. In the technology area, shares of Cisco Systems (CSCO – Free Cisco Stock Report) moved higher, after the networking giant delivered a solid report. In the retail space, Walmart (WMT – Free Walmart Stock Report) shares gained ground, as traders were impressed with that company’s outlook. On a related note, shares of J.C. Penney (JCP) slumped, after that company reported a wider-than-anticipated quarterly loss and provided weak full-year guidance.
Technically, stocks have been a bit choppy during the first days of August. However, for the most part, sentiment still seems bullish.
- Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
It continues to be all about Turkey on Wall Street. In fact, the financial crisis in that country, which appears to be getting worse by the day, began to escalate late last week. However, following a two-day, 320-point setback in the Dow Jones Industrial Average, that composite rallied on Tuesday, gaining back more than 100 points of that Friday-Monday downdraft. However, it was back to the red ink yesterday morning, as the blue chip composite quickly fell back by more than 160 points due to lingering fears about a spreading financial reversal. Declines in technology and financial shares led the overall setback early.
Then, after that opening fall, things got worse, and as we hit the first half hour of trading, the Dow had fallen to a loss of more than 240 points, putting it just modestly above the 25,000 mark. Losses in excess of 80 points were tabulated by the NASDAQ. Further, analyst downgrades of Turkish equities also contributed to the selling in that nation's stocks and to the decline on our shores. These follow setbacks across much of Asia and Europe earlier in the day. All along, such early selloffs had been met by bargain hunting. Wall Street waited to see if such a comeback would materialize later in the morning or the afternoon.
Meantime, in other news on this middle day of the trading week, two key economic reports were issued in the morning. In one data release, made an hour before trading began, the government reported that retail sales had increased by 0.5% in July. That gain was well above expectations of a 0.1% rise. Retail sales excluding autos, which had been expected to increase by 0.4% last month, rose 0.6% instead. Propelling the gains were strong advances in spending over the Internet and at restaurants, clothing outlets, and gasoline stations. Sales at furniture stores and at sporting goods purveyors lagged.
In another key release, made just before the market opened, it was reported that industrial production rose just 0.1% in July, which was just a third of the gain forecast. That followed a 1.0% surge in June. At the same time, capacity utilization held level at 78.1% in July, after gaining nicely the month before. Clearly, there are signs that parts of the economy are slowing somewhat. It should be noted, however, that the June industrial output gain was revised upward from 0.6% to 1.0%, so the deceleration last month was much more modest than the raw numbers would imply. Still, it is likely that current quarter GDP growth will slow a bit.
Getting back to the stock market, the key averages weakened further as we hit the one-hour mark of trading, with the Dow's drop approaching 300 points, with that composite threatening to fall below the 25,000 level. And, in fact, it did broach that psychological level as we passed the 90-minute mark of trading, with the problems in Turkey now starting to concern the Street even more, as it seemed to possibly presage ills elsewhere. The selling would intensify for a time, with the Dow and the NASDAQ falling by more than 300 and 100 points, respectively, before some late-morning buying pared the Dow's loss by some 25%.
That attempted comeback would last well into the early afternoon, with the Dow briefly cutting its loss to fewer than 200 points. But worries that Turkey's problems could spread to other emerging market nations, a selloff in tech, and a sharp drop in the shares of giant retailer Macy's (M) on top-line issues even as earnings did well, combined to engender additional selling as the afternoon pressed on, with the Dow falling back down to about 25,000 once again. Still, in line with recent trends, the market staged a final hour comeback, which really bit into the losses, causing the Dow to end the day just 138 points in the red.
One index that did not mount as strong a comeback was the NASDAQ, which ended off 97 points, or 1.23%. The small-cap Russell 2000 did even worse dropping 1.29% and many more stocks fell than gained in the composites. Looking out at a new day now, we see that yesterday's woes stateside had some impact in Asia where the major markets were weaker in overnight trading. Stocks in Europe, meantime, are now gaining amid indications the United States and China will meet later this month to talk about tariffs; oil, a big loser yesterday, is virtually flat; and Treasury note yields, which fell yesterday, are now up. Finally, our equity futures are poised to surge at the open on the U.S.-China news.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
