After The Close
The U.S. equity averages exhibited a mostly negative tone amidst a generally softer day of trading on Wednesday. Declining shares held a slight edge over advancing issues, with reductions in the technology and energy sectors offsetting modest upticks within the noncyclical consumer goods and utilities groupings. Of the major large-cap indexes, only the Dow Jones Industrial Average was able to spend time in positive ground during the session. By the closing bell, the blue chip composite sat near its breakeven line.
The tech-centric selloff was spurred by the struggles of Netflix (NFLX), which shed value as concerns mount over the gradual waning of its grip on the streaming media market. Forthcoming and existing alternatives from Disney (DIS – Free Walt Disney Stock Report), Apple (AAPL – Free Apple Stock Report), and others could threaten its rapid subscriber growth in the coming years. Accordingly, the NASDAQ and, to a lesser extent, the S&P 500 spent the majority of the session well into negative territory.
In addition to the initial bearishness tied to Netflix, a report that indicated Attorney General Jeff Sessions was preparing to look into the tech industry and its supposedly anti-competitive practices stirred some worries. Specifically, the potential meeting between Sessions and state attorneys general will concern recent statements by President Trump that Google (and parent Alphabet (GOOG), Twitter (TWTR), and Facebook (FB) were censoring conservative content. Though this is likely to be some posturing ahead of the midterm election season, the matter bears watching, for now.
Elsewhere, the price of U.S. crude oil faltered. The reason was double-edged: on one side, the projected track of Tropical Storm Gordon moved away from oil-producing areas; on the other, oversupply concerns have amplified in the past 24 hours. In fact, the commodity market was also rankled by ongoing fears over Turkey’s currency crisis and the broader uncertainty related to global trade agreements.
Looking ahead, developments on global trade are likely to remain an area of focus for traders, but we suspect the business beat will steal away investor attention over the next few days. New data on non-manufacturing activity and August employment figures set to be released on Thursday and Friday, respectively.
– Robert Harrington
At the time of this article’s writing, the author did not have any positions in the companies mentioned.
Before The Bell
The increase in trade tensions evolved, as Canada failed to nail down an agreement with the United States to replace the current NAFTA pact by last Friday's deadline. That result prompted the President to tweet that there was “no political necessity to keep Canada in the new NAFTA deal”. President Trump also said that Congress should not intervene in the talks. Still, some accord is likely to be struck with our northern neighbor following our earlier deal with Mexico. The matter of trade with China, though, seems more serious; we also are seeing some financial problems evolve in developing nations, at this time.
Meanwhile, in other news, the Institute for Supply Management, a trade group, reported yesterday that manufacturing had picked up speed in August, with that key survey registering a reading of 61.3--well above the 50.0 tally that separates a growing from a contracting industrial sector. In all, the survey result surpassed the July tally of 58.1; it also was nicely higher than expectations of 57.5. Helping this category to the solid September showing were strong gains in the following individual areas: new orders, production, employment, supplier deliveries, and backlogs. However, price growth, albeit still strong, slowed its advance last month.
The market appeared to firm up after this release, with the Dow's deficit easing to fewer than 50 points, for a time, as the morning wound down. However, these was a pickup in selling as the noon hour arrived, with the Dow's deficit swelling to near 100 points again, as Treasury yields edged up past 2.90% on the 10-year note. As for individual stocks, NIKE (NKE – Free NIKE Stock Report) and Verizon (VZ – Free Verizon Stock Report) remained the largest-percentage losers on the blue-chip composite as the afternoon got under way. However, the market did not stay down there for very long, and as we moved further into the afternoon, a second rally took hold, with the Dow the big beneficiary.
This shaky showing followed the best August for the stock market in four years. As for September, it has been the worst month for the Dow in well over half a century, even though some of the more celebrated short-term setbacks have occurred in October. In all, the Dow, the S&P 500, and the NASDAQ have fallen by anywhere from 0.5%-0.7% during September over the past 50 years, or so. Still, despite the historical weakness for this month, the market managed to head toward the breakeven mark as we moved into the middle of the afternoon.
Breaking things down, was the fact that even as the averages came back, the various sectors were still down, for the most part, with the basic materials group the weakest sector by far. All told, the late afternoon saw eight of the 10 groups falter, even as the Dow entered the plus column briefly, while losing stocks held a formidable lead on the Big Board at that time. The market would then fail to turn positive into the close, although the final tallies, which featured across-the-board losses, would be much less bearish than the midday tallies. On point, the Dow would fall by just 12 points.
Now, a new day begins, and after yesterday's mildly bearish start to the month, we see that the major indexes were lower in Asia overnight, while in Europe, the leading bourses are trending downward, as well, on widening trade concerns. Also, oil, a gainer yesterday, is moving notably lower so far this morning; Treasury note yields, which ticked higher yesterday, are now fairly flat; and the U.S. equity futures are showing early losses of some note. Much of the rest of the day, we sense will be taken up with trade news and car sales. Tomorrow, we will get data on non-manufacturing activity, and Friday is scheduled to see the release of August employment figures. As always, stay tuned.
