After the Close
After an up-and-down morning and bearish lull through the midday hours, the U.S. large-cap indexes finished Thursday in a range-bound pattern near their respective breakeven lines. Profit taking continues to be a headwind for the averages, as many opportunistic traders take advantage of Tuesday’s solid climb after a several-week period of difficulty. Still, despite the week’s decent the S&P 500 and NASDAQ remain down from their month-ago levels, with the Dow up in that timeframe largely due to the strong earnings season and a continuing hope that corporate tax reform will come to fruition by the end of the year. The Russell 2000 Index, which tracks the fortunes of select small-cap equities, added more-than five points (roughly 0.4% on the day).
Market breadth was ostensibly even, with upward activity in the basic materials, energy, and healthcare sectors offset by a selloff in the non-cyclical consumer goods, industrial, and telecom industries. Many retail stocks ticked higher, as traders evaluated a better-than-expected, though still soft, earnings season from the embattled sector. Meanwhile, Amazon.com (AMZN), one of the primary forces disrupting the traditional retail industry, saw its shares move lower.
As for oil, U.S. crude wrapped the session nearly 2% lower, to $47.43 per-barrel, on fears that demand from Gulf Coast refineries will suffer at the hands of the recently-upgraded Hurricane Harvey. The storm is expected to make landfall shortly after midnight on Saturday and, based on current projections, could spell for moderate-to-serious damage along the coast. Looking overseas, it’s likely that traders were not too impressed with OPEC all-options approach to addressing the global inventory glut that’s pressured oil prices for some time now. Compliance with its current accord has slipped in recent weeks, giving credence to worries that the cartel may not be capable of enacting a definitive measure to stabilize the market.
Tomorrow, the market will be mostly concerned with Federal Reserve Chair Janet Yellen’s speech in Wyoming. Her term expires in February, with no clear indication from her or the President as to whether or not she will be reappointed. Tomorrow’s address could well be her final speech as Fed Chair, and we expect traders to closely monitor her outlook on the central bank’s future strategies as it strives to unload its sizable balance sheet. Stay tuned. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:20 PM EDT
The stock market is putting in a somewhat weaker session today. At roughly noon in New York, the Dow Jones Industrial Average is down 10 points; the broader S&P 500 Index is off three points; and the NASDAQ is lower by 20 points. Market breadth is divided, with advancers about even with decliners on the NYSE. Most of the major stock sectors are showing losses, with pronounced weakness in the technology group. In contrasts, the basic materials issues are managing to buck the downtrend, possibly on hopes of a recovery in the global economy.
Meanwhile, there were a few economic news items reported this morning. Of note, initial jobless claims came in at 234,000 for the week of August 19th, which was a somewhat better figure than had been anticipated. Elsewhere, existing home sales came in at an annualized rate of 5.44 million units for the month of July, which fell short of the consensus view. Tomorrow, traders will turn their attention to the Federal Reserve, as the central bank’s Chair, Janet Yellen delivers some remarks in the morning.
Finally, a number of retailers posted financial reports over the past 24 hours. Specifically, shares of Williams-Sonoma (WMS) are trading higher today, after the home furnishings company delivered a solid release. Meanwhile, shares of Guess (GES) are soaring after the apparel designer and retailer provided an upbeat report. In addition, Abercrombie & Fitch (ANF) stock is up nicely in response to a stronger-than-anticipated set of numbers.
Technically, stocks put in a lackluster performance in the month of August. But, summer will soon be drawing to a close, and the pace of business should pick up in September. This may well help lift market sentiment. – 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
The strong rally in the stock market on Tuesday, which reflected revived hopes that the Administration would eventually get the tax reform changes it has sought since the new Administration took over in January, did not carry over to yesterday morning. Indeed, stocks started the session lower and continued in a negative vein through the conclusion of trading. On point, as we reached the noon hour in New York, the Dow Jones Industrial Average, a 192-point winner on Tuesday, had fallen back by about 45 points, with a morning-worst reading of some 90 points. The other averages were weaker, too, following outsized gains the day before.
Behind the renewed, but moderate, selling yesterday were concerns emanating from the President's speech at a campaign rally the night before, in which he said the government might be shut down if the U.S.-Mexico wall is not built and paid for. Also, his threats about a possible termination of the North American trade agreement, or NAFTA, unsettled investors. Currently, there are differences between the United States, Canada, and Mexico, on the pact. Also, investors were nervous as they awaited speeches from Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi beginning tomorrow at Jackson Hole WY.
As to the equity market, the declines, in truth, were modest, with an even split between gaining and losing equity groups and just a slight advantage for individual issues gaining in price on the NYSE. Overall, the stock market seems more focused on the political comings and goings in Washington and around the globe than it is on the nation's economy, which continues to move forward, if in unimposing fashion. So, stocks meandered into the early afternoon, with weakness notable on the consumer front, but strength in the energy area.
The market then faltered anew, with the Dow falling to a loss of just over 80 points in mid-afternoon, with worries about a possible end to NAFTA and a threatened government shutdown by the President weighing on sentiment, which just a day earlier had been so strong on hopes for tax reform. Now, suggestions that the President and Senate Majority leader Mitch McConnell are no longer on speaking terms, with its implications for the adoption of business-friendly legislation, has hurt market optimism. Also, a report showing that new home sales had eased off in July, falling 9.4% to a seven-month low, also damaged the bullish case some.
The balance of the afternoon brought scant relief to the bulls, as the above worries persisted, most notably those that pertained to the outlook for Administration-backed legislation, which is widely favored on the Street. With earnings season now largely over, the next Federal Reserve FOMC meeting still a month away, and the critical government employment some 10 days off, politics are now taking center stage. And that is not good given the deep divisions on Capitol Hill. So, stocks continued to move lower as we entered the home stretch yesterday.
As the final bell sounded, the major averages were down near their session lows, with the Dow off 88 points; the S&P 500 down by eight points; and the NASDAQ lower by 19 points. Small losses also were tabulated by the small-cap composites. Still, reflecting the late weakness, gaining stocks still managed to hold a slim lead on declining issues on the Big Board. At the same time, the top 10 equity groups were evenly split between gainers and losers, with the former headed by the energy and basic materials stocks, which benefited from a small recovery in oil prices yesterday.
Looking now to a new day, we see that stocks were generally lower in Asia overnight, while the bourses are up in Europe thus far this morning. Elsewhere, oil, a gainer yesterday, is reversing course somewhat; gold, which has recently risen to near $1,300 an ounce is now off a bit; and yields on the 10-year Treasury note, which ended up trading at 2.17% yesterday, are a tad higher thus far this morning. Finally, U.S. equity futures are trading higher in early dealings, as investors await Jackson Hole speeches. As to news in the day ahead, the National Association of Realtors will be reporting on existing home sales later on this morning. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
