After The Close
Stocks got off to a weak start this morning, but managed to firm in the afternoon, aided by some buying late in the day. Early in the session, traders seemed hesitant to enter the market, as they were likely waiting for word from the Federal Reserve. While no concrete announcement was offered, it seems sentiment started to shift and the mood became more supportive. Of note, today the FOMC began its two-day meeting, which concludes tomorrow at 2PM (EDT) with an interest-rate decision and some prepared remarks. The sense on Wall Street is that the central bank will agree to another 25 basis point reduction in rates, as it looks to keep the economy expanding. At the end of today’s session, the Dow Jones Industrial Average was ahead about 34 points; the broader S&P 500 Index was up eight points; and the NASDAQ was higher by 32 points.
Market breadth showed a divided session, with winners about even with losers on the NYSE. The major equity sectors were mixed. There was considerable weakness in the energy and basic materials issues, which was due to a large decline in crude oil prices. Of note, fears of production outages in Saudi Arabia seemed to subside. However, a better showing in the consumer, services, and utility names helped lift the averages.
Meanwhile, in economic news, industrial production increased 0.6% in the month of August, which was better than had been anticipated and also a big improvement over the soft number logged in July. Tomorrow, we get a look at the August housing starts and the building permits. The EIA also will release the latest weekly crude oil inventory figures.
In the corporate arena, it was a quiet day for profit reports. Nonetheless, shares of Corning (GLW) lost ground after that company issued a warning that business may be slowing. Corning is a manufacturer of specialty glass and displays used by technology companies.
Technically, stocks have regained some ground in September. However, it remains to be seen if the bulls can keep the rally in place. In addition to the trade situation, investors will be looking at the corporate profit outlook, which will likely come into focus as the September quarter wraps up. Many traders will likely be keeping an eye out for pre-announcements and revisions.
– 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 logical fear is that higher oil quotations, if sustained, would further slow down an already weakening global economy. And on that count, traders also were unnerved by a poorer-than-forecast industrial production reading out of China, the weakest such tally in 17 years. Also troubling investors was the calling of an auto work stoppage at carmaker General Motors (GM) yesterday morning. That labor dispute, the first at the auto giant since 2007, sent GM shares lower in early dealings.
The stock market then would weaken further as the morning moved along, with the Dow reaching a low around noontime, at which point it would be off more than 170 points on those energy fears. The deficit would ease a little as the lunch hour moved along, so that in early afternoon, the Dow would still be down by some 140 points. Lesser declines were being registered by the S&P 500 Index and the tech-laden NASDAQ, while the small-cap Russell 2000 actually was a bit higher. The concerns clearly were in the industrial area.
The early afternoon would see continued backtracking and unimpressive bits of buying, as investors continued to be concerned about geopolitical events, but were not ready to throw in the towel. So, the down moves were modest. All the while, investors were tuned into the Federal Reserve, which is to commence its two-day FOMC meeting this morning. Expectations are nearly unanimous that the central bank will vote to reduce interest rates tomorrow afternoon. The overwhelming view is that the Fed will cut rates by 25 basis points.
So, the market continued to drift in a narrow range into the close, with the market never falling sharply, but also not climbing back to pare the losses much either. In all, the market stayed within shouting distance of the day's lows, but managed to finish above them when the final tallies were in. At the end of the session, the Dow, once off by just over 185 points, ended matters in the red by 143 points. Losses of nine and 23 points, respectively, were tabulated by the S&P 500 Index and the NASDAQ. The Treasury yields fell back sharply, meantime.
Looking out to a new day and to the start of the consequential FOMC meeting today and tomorrow, we see that the principal indexes were mixed in Asia overnight. In Europe, the major bourses are showing early choppiness. In other markets, oil prices, up sharply yesterday following the hits on the Saudi oilfields, now are off a little this morning. Finally, Treasury note yields are easing slightly this morning. And ahead of the FOMC meeting, the U.S. equity futures are suggesting a narrowly lower opening when trading resumes this morning.
