After The Close
The large-cap indexes all finished around the unchanged mark on Tuesday. Following a strong open across the board, the Dow Jones Industrial Average, the S&P 500, and tech-laden NASDAQ composites each dipped below their respective breakeven lines around lunchtime in New York. Most of the afternoon saw trading sentiment brighten, as the bulls benefited from news that Senate Republicans were suspending their efforts on healthcare reform for the foreseeable future. The Trump Administration has indicated it intends to prioritize corporate tax reform, reaffirming the optimism that originally catalyzed the market’s post-election rally last November.
There were also some mixed updates on the business beat today. New home sales in August decreased for the second time in as many months, while prices registered higher. Figures for May through July were also revised lower. Elsewhere, although the Consumer Confidence Index beat consensus expectations, the 119.8 reading slipped on a sequential basis.
Also contributing to the tug of war today was some profit taking amidst some of the business sectors. Financial issues, particularly lending banks, have fared exceptionally well in recent periods as the Federal Reserve deploys a markedly hawkish tone in regards to its near-term rates policy. Today’s speech by Janet Yellen suggested that the central bank’s monetary strategy will be more accommodative. Accordingly, shares in this industry group lagged today.
Meanwhile, in tandem with profit taking in the oil market, where U.S. crude recently rose to a two-year high valuation, the energy sector shed aggregate value today. Basic materials equities also lagged. Overall, five of the ten major market sectors finished in the green, led by modest gains by the consumer noncyclicals and technology groups. The major U.S. indexes sharply pared gains as the closing bell neared, with each finishing near their respective breakeven lines. The Dow was unable to break its streak of daily losses, which now stands at four consecutive sessions.
Looking out to the remainder of the week, data on GDP, durable goods orders, and personal spending headline the economic slate. Updates from the Fed or from Capitol Hill could serve to influence trading in either direction until third-quarter earnings season commences next month.
– 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 - 12:15 PM EDT
The U.S. equity markets opened modestly to the upside this morning, but have since given back most of those gains.
On the economic front, the latest data on new home sales showed that purchases in August were down for a second consecutive month, while prices continued to rise. Specifically, the Census Bureau reported that single-family home sales were down 3.4%, to an annualized pace of 560,000 units. Also, figures for May through July were revised downward by 19,000 units. Meanwhile, the Conference Board’s Consumer Confidence index came in at 119.8 for September. Although above consensus expectations, the number was down slightly from the reading for August.
As we pass the noon hour of trading in New York, the major stock indexes were hovering around their lows for the session, but still holding onto small gains. The Dow Jones Industrials were up eight points; the broader S&P 500 Index was ahead by one, while the tech-heavy NASDAQ was up by three points.
The 10 major market sectors were evenly split between advancers and decliners, but none had strayed far from the unchanged mark. Telecommunication issues were out in front with a gain of about a quarter percent, while healthcare stocks were at the other end of the spectrum with a similarly sized decline. Elsewhere, oil prices took a step back after a strong advance on Monday. Light sweet crude was down about 1.0%, to around $51.75 a barrel, as it appears that U.S. petroleum inventories were likely to rise for a fourth consecutive week. However the commodity is still holding onto an 8% gain over the last 30 days, fueled by generally improving supply/demand fundamentals.
Meanwhile, stocks overseas put in a mixed showing, with slight gains for Germany’s DAX and France’s CAC-40 balanced out by a quarter percent setback in Britain’s FTSE 100.
Looking ahead, the market will be lending an ear to Fed Chair Janet Yellen within the hour as she gives a speech in Cleveland. Later in the week, investors will be poring over reports on durable-goods orders, GDP, and personal spending, as they try to divine the Fed’s next step.
— Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Fresh off of another series of all-time highs by the leading equity averages, Wall Street started the new week with additional selective gains at the outset of the trading day. On point, the small-cap Russell 2000 Index rose to its best level ever as some riskier equity plays, along with some heretofore out-of-favor issues, rose in price at the start of the trading session yesterday. However, the Dow Jones Industrial Average fell early as did the NASDAQ on weakness in the technology stocks.
But after that initial selloff, stocks attempted a turnaround, and as we passed the midway point of the morning, the Dow made a brief appearance in the plus column, albeit just nominally, However, the NASDAQ was never able to mount much of a charge, staying well in the red on the aforementioned tech softness, principally in high-profile names, such as Facebook (FB) and Amazon (AMZN). Then, after some tough talk by North Korea on the possibility of war with the United States, the stock market fell more sharply as the morning wound down.
As for the Dow, that blue chip composite tumbled to a session-worst decline of some 115 points. However, it was on the NASDAQ where Facebook and Amazon are domiciled that the real downward action took place, with that composite tumbling by some 80 points at mid-session before cooler heads again prevailed. As we noted, the heightened tensions involving North Korea were the main contributors to the day's downward price action, which continued into the afternoon. But it wasn't all that was at play. Also in the mix was sector rotation.
Here, investors were continuing to move out of technology stocks after their big run earlier in the year, and into some erstwhile sector laggards, such as energy and basic materials. Rising oil quotations also is playing a role, as many energy-related equities are starting to gain ground. Also, the transports and the small-cap stocks shook off their summer doldrums, with the Russell 2000 hitting an all-time high during the day following a two-month respite. Still, it was a losing day, overall. In all, that composite is now up 3% this month.
The market then bounced off of its lows, as we headed toward the home stretch, with the Dow's triple-digit midday loss being about halved. The worst losses on the NASDAQ also were pared, as well, but less aggressively so. In other news, Angela Merkel, Germany's long-serving Chancellor, won another term, but with a reduced mandate, as the far right party came in third place. In other news, gold rose on the rising tensions globally and interest rates fell, with downward pressure on Treasury yields.
All told, the Dow lost 54 points, or about half its midday slide, while the NASDAQ and the S&P 500 shed 56 and six points, respectively. But the Russell 2000, despite some late selling, still managed a small gain on the session. Looking out to a new day, and glancing overseas at the markets, we see that stocks were mixed in Asia overnight, while in Europe, the bourses are showing early ticks down. Elsewhere, oil is off slightly; gold is steady; and bond yields are flat. Finally, U.S. equity futures are posting some slight early losses.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
