After The Close
Stock market trading today was largely directionless, with the Dow Jones Industrial Average and S&P 500 trending slightly lower throughout the day. However, the NASDAQ bucked this trend, aided by a decent stock performance from Apple Inc. (AAPL - Free Apple Stock Report). Dow component Nike (NKE - Free Nike Stock Report) also trended higher, before its earnings release after the bell. Overall, there were about as many issues advancing as declining. Energy stocks improved, aided by higher oil prices, while utility issues fell on the day, likely in anticipation of tomorrow’s FOMC rate decision.
Meantime, the U.N. General Assembly is gathering this week, and President Trump addressed the group earlier today. In his speech, the President stated that the U.S. “will no longer take abuse on trade”, which suggests ongoing trade disputes are not close to ending. This may hurt market sentiment in the coming days. In addition, he noted that more sanctions would be placed on Iran, starting on November 5th, while encouraging other countries to join him in that endeavor. This helped oil prices inch up at the time, reaching a high of $72.74 per barrel before retreating some.
On the economic front, consumer confidence recorded an 18-year high of 138.4 in September, nearing the all-time peak of 144.7, reached in September of 2000. This suggests that consumers are willing to keep the economy going. Also, the Case-Shiller 20-city index rose 0.1% in the month of July. This was the slowest rate of increase in 11 months. The highest one-month price gains were reported in Las Vegas and Cleveland.
Several stocks made news today, including Michael Kors (KORS), which announced that they will purchase Versace for $2.1 billion. This will bring the high-end designer into the fold. Management plans to open another 200 to 300 stores largely in the U.S., while Versace’s current footprint will increase the portion of European sales. Once the acquisition closes, the company will change its name to Capri Holdings. In other news, electronics-maker Jabil Inc. (JBL) fell on a report that the CEO stated that margins will not expand until 2021. Shares of Sonic Corp. (SONC) were up on the day after it agreed to be acquired by Inspire Brands for $43.50 per share in cash.
Looking forward, tomorrow looms large for economic news as the Federal Open Market Committee will release its decision on interest rate policy at 2:00 PM. Most on the street are projecting a 25-basis point hike in interest rates. Too, the Federal Reserve’s statement accompanying the outcome will be watched closely in order to glean what may occur at future meetings. In addition, some earnings reports are expected tomorrow, including Carmax Inc. (KMX) before the bell, and Bed Bath & Beyond (BBBY) after the close.
- John E. Seibert III
Before The Bell
A succession of headwinds greeted Wall Street as traders returned yesterday morning from the latest weekend. To start, there is the most recent international trade news, and here the tidings are not supportive, as China and the United States remain locked in an intensifying dispute, with tariffs being slapped on each other by both countries. In addition, there is the turmoil in the Capitol, where word that the Deputy Attorney General of the United States, Rod Rosenstein, was about to resign shook things up even further.
But that was not all. There also were fresh concerns that the President's Supreme Court nominee was facing new allegations of misconduct, while business executives noted that many companies, fearing the fallout from the major trade battles involving China, were cutting back on their capital investments. Add in some logical profit taking after the Dow Jones Industrial Average and the S&P 500 Index hit all-time records last week, you had the makings of a material morning setback that pushed the Dow down nearly 200 points as we neared noon in New York.
The biggest setbacks, in fact, were on the Dow, with that index surrendering about 0.7%. That surpassed the half a percentage point drop in the S&P 500 and the quarter of a percentage point setback in the NASDAQ. Meantime, in addition to the aforementioned concerns, the Street also was preoccupied by the FOMC meeting, with that two-day affair about to begin this morning. Expectations are high that the Federal Reserve will hike the federal funds rate target by a quarter of a percentage point. A follow-up increase is then likely in December.
The selling, meanwhile, continued as the afternoon got under way. One market that was strong, however, was oil, with a barrel of U.S. crude soaring to a four-year high above $72 after Russia and China said that they would not boost their output despite calls by the President to increase global production. Worse, a barrel of Brent crude, which is the oil traded in Europe climbed past $81. While this further uptick helped strengthen energy stocks, it did little for the stock market, as a whole.
Things improved little as the session moved toward the close, with the report that Rod Rosenstein hadn't resigned, but, instead, would meet with the President on Thursday having little impact on trading. Interestingly, the Dow fell back toward the day's lows, but the NASDAQ actually edged into the black late in the session. This divided tone reflects, we sense, the relatively greater impact of trade issues, as the industrials on the Dow are more sensitive to global matters. As before, domestic political headwinds are less critical to this point.
Things changed little further as the session concluded, with the Dow ending matters off by 181 points. But the NASDAQ managed to edge into the black by six points. Looking ahead to a new day that will see the start of the latest FOMC meeting, we see that stocks were lower in Asia overnight, while in Europe, the markets are trending a bit higher. Also, oil, a gainer yesterday, is trading once more with gains, while yields on the 10-year Treasury note, which ended at 3.08% yesterday, are now up to 3.11%. Finally, U.S. futures are trading with early gains.
– Harvey S. Katz, CFA
