After The Close - The U.S. stock market opened higher this morning, pulled back after about an hour, quickly recovered, and then spent the rest of the day drifting higher again. At the close of the session, the Dow Jones Industrial Average, generally the weakest of the indexes, was up 19 points; the broader S&P 500 Index was up seven points; and the technology-laden NASDAQ was better by 23 points. Meanwhile, the general tone of the market was positive today, as advancing stocks outnumbered decliners by about two to one on the NYSE and the NASDAQ. Also, many market sectors made progress. The energy group made solid strides, thanks to rising crude oil prices. The technology stocks also pressed higher, helped by gains in the semiconductor area. In contrast, some of the consumer names lagged today.
Some of the market’s lackluster performance today may have been due to a lack of broadbased participation. For one, volumes have been quite light lately, as many traders are on vacation. Also, the ongoing political turmoil taking place across the globe has done little to inspire investors. Nonetheless, it should be noted that the market seems quite calm. The VIX was up slightly today, to just over 12, but this sentiment measure remains at very low levels.
Meanwhile, traders received a batch of mixed economic news today. Personal income moved up slightly in July, while spending for the month retreated nominally. Elsewhere, the Chicago PMI rose to 64.3 in August, suggesting that the economy in that region is doing well. Too, the University of Michigan’s Consumer Sentiment Survey came in with a final reading of 82.5 for the month of August. This showing was a bit better than had been anticipated and up from July’s reading.
Finally, the corporate news was light today. However, there were a few companies in the technology sector that reported. Shares of Avago Technologies (AVGO) moved higher, after the Singapore-based semiconductor company put out a strong report and offered encouraging guidance. Also, Splunk (SPLK) shares rose, as investors were pleased with the software company’s issuance. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:00 PM EDT - The major U.S. indexes started the last session of the trading week modestly to the upside, but were not able to hold those gains very long. About a half-hour into the session, the selling picked up, as mixed economic news both here and abroad and some growing international worries (see below) unnerved investors. However, the overly resilient bulls were not down for long and responded with a push of their own. Thus, as we reach the midday hour on the East Coast, the major U.S. equity indexes are modestly higher, with the Dow Jones Industrial Average the last to move back into positive territory.
As for trading on the Continent, which is nearing the close, the going has been a bit tougher for traders. Most of the major European bourses, including Germany’s DAX and London’s FTSE-100, are lower after U.K. Prime Minister Cameron spoke of growing terror threats from ISIS and economic data disappointed.
As noted, growing international worries weighed briefly on equities this morning and remain a modest headwind for traders. Specifically, United Kingdom authorizes raised its terror threat level to severe and noted that a terror attack is “highly likely.” The concerns about the growing unrest in the Middle East and the ongoing geopolitical tensions in Eastern Europe are being watched closely by traders. That said, some comfort can be taken in the fact that the major indexes did not sell off more abruptly on the overseas turmoil. Anemic trading volume today may be part of the reason why the initial negative reaction to the international concerns was not more pronounced.
Meantime, we received some mixed U.S. economic news and a number of less-than-comforting economic reports from Europe. And the news from the business beat is definitely having an impact on trading so far today. Stateside, we learned that consumer spending fell 0.1% on a month-to-month basis in July and personal income rose a modest 0.2% last month. The personal spending and outlay figures were mostly offset by a better-than-expected reading on consumer sentiment from the University of Michigan. That report, which came out at 10:00 A.M. (EDT), showed that consumer sentiment came in 82.5 in August, up from 81.8 the month before and above the consensus expectation of 80.1. Recent U.S. economic data are an indication that economic output will probably moderate slightly from the 4.2% GDP advance seen in the June quarter. Conversely, the news from the Continent also was a bit dour. This morning we learned that inflation in the euro zone slipped to 0.3% in August, which raised some concerns about deflation in the 17-mation confederation; Germany’s retail sales fell 1.4% in July, which is another alarming sign for the euro zone’s largest economy; and unemployment rose last month in Italy, an economy that recently fell back into recession.
Turning back to the United States, all of the groups in the top-10 sectors are now in positive territory. There is some leadership coming from the technology and healthcare sectors. Within the technology space, it should be noted that shares of Apple (AAPL) hit another post-split high during today’s session. Investors were happy to hear that the technology behemoth is working with Dutch-based chip maker NXP Semiconductors to add secure near-field communications to the next iPhone. This would enable iPhone users to pay by touch. This report comes on the heels of reports earlier this week that Internet hackers may have broken into JPMorgan Chase’s (JPM - Free JPMorgan Stock Report) banking platform, but the breadth of the cyber hijack is still unknown.
Looking ahead to the second half of the trading day, we expect trading volume to remain very light as traders get an early start on the Labor Day holiday weekend. All signs point to the indexes finishing the session higher, but we do note that President Obama has canceled his meetings in New York today and is headed back to the White House where the discussions will focus on the Middle East. Any news about this situation or briefings by the President are expected to be closely monitored by investors and may well influence trading, just as Prime Minister Cameron’s briefing did this morning. Stay tuned. - William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market started out the penultimate session of August notably to the downside in what had all the appearances of being a major short-term reversal in the latest bullish move, which began midway through this month. The impetus for what seemed to be a late-summer swoon was a sharp drop in stocks in Europe earlier in the day. That setback was occasioned by concerns regarding an escalation in hostilities between Russia and Ukraine and rumors of an invasion of the latter by Russia, a report suggesting deflation was a growing risk on the Continent, and concerns about euro-zone growth.
This weakness carried over into the early part of our trading day, although a pair of U.S. economic releases made before the start of trading helped lessen the reaction to the slide in Europe. Specifically, the Labor Department reported that weekly jobless claims had remained just below 300,000 in the latest seven-day stretch, suggesting that the odds continue to favor further improvement in our job market. Note that the more critical report on monthly employment and unemployment is due out a week from today. Also, in an even more telling release, the Commerce Department reported that the nation's gross domestic product had risen by an upwardly revised 4.2% in the second quarter. Initially, the GDP gain had been estimated at 4.0%. Importantly, while increased inventories had accounted for much of this strength, the inventory contribution was a bit less in the revision, giving the economic advance a somewhat better quality and, perhaps, greater staying power.
So, armed with these encouraging reports, the downturn was moderated somewhat, but was still rather formidable at the outset, with the 30-stock Dow Jones Industrial Average tumbling by just over 100 points initially, while the NASDAQ fell back by close to 30 points. However, stocks did not stay down there for very long, as solid fundamentals at home helped to overcome the heightened fears abroad. So, within an hour or so, the losses were trimmed by some two-thirds. Then, stocks stayed in a tight, but lower, band for the balance of the session, with the Dow holding at a loss of some 40 points throughout.
By the close, the Dow, keeping to that narrow band, showed a loss of 42 points; the NASDAQ was in the red by a dozen points; and the Standard and Poor's 500 Index was lower by three points. Meanwhile, that latter and broadly configured composite did edge a bit below the magical 2,000 mark, after dancing around that psychological marker for the past several days. The Dow, meantime, remained moderately above 17,000. The S&P Mid-Cap 400 eased by three points, or 0.2%, while the small-cap Russell 2000 nudged down by seven points, or just under 0.6%. Also, most of the 10 equity groups ended the day lower, with only the interest-sensitive utilities moving higher. The weakest of the groups was basic materials. The ratio of declining stocks over advancing issues came to 17 to 13 on the Big Board and almost two-to-one on the NASDAQ. But although the day had a weaker tilt to it, there was no panic selling, which is encouraging.
Meantime, this seesaw session allowed the market to head into the final trading day of August with its recent gains intact. In fact, the equity market has made some noteworthy strides as the month has rolled on and enters the concluding day of this low-volume
month with stocks near their high-water mark for the year, which is encouraging given the notably troubled international backdrop.
Now, as we look ahead to the final trading day of August, we find that stocks were mixed in Asia overnight and are now trimming their earlier gains in Europe following the release of overly tame inflation data on the Continent. Concerns about possible deflation are still being floated around in Europe. As to our futures, the early read is quite positive, especially on the NASDAQ, where a gain of almost 10 points is now in the works. At this point, with an hour to go before the start of the trading day, the market seems to be setting up for a strong opening.
Finally, in a report issued just moments ago, the Commerce Department reported that personal income had risen just 0.2% in July, following back-to-back monthly increases of 0.5%. A gain of 0.3% had been the consensus forecast. Worse, consumer spending fell 0.1% last month; an increase of 0.2% had been forecast. This was the weakest showing in that category since last December and suggests, as we have been indicating, that GDP growth in the current quarter will lag moderately behind the 4.2% pace of the June period. - Harvey S. Katz