After The Close - U.S. equity trading was largely directionless on Thursday, as investors parsed through earnings updates from Corporate America and anticipate tomorrow morning’s employment report. The market’s mixed nature can be seen by looking at the major indexes. The Dow remained above the 22,000 milestone for most of the day, while the S&P 500 and NASDAQ saw their losses extended in the final half hour of trading. Market breadth was negative due to selling amongst mid- and small-cap stocks, while most business sectors returned aggregate value on the day. Energy industry stocks were the biggest laggards on the day, with financial issues also paring value from bell to bell.
The earnings slate was headlined by Tesla (TSLA), which surged behind a wave of optimism related to the company’s soon-to-be-released Model 3. Though the company reported a wider-than-expected loss, investors continue to view the electric carmaker favorably as it attempts to scale out its auto business and diversifies into home energy and lithium production. On the flip side, Prudential (PRU) slipped on weak earnings, though the diversified insurance conglomerate did lift its top line in the recent quarter. Fast food operator Yum! Brands (YUM) also struggled after revealing a same-store sales decrease at Taco Bell. After the market closes, KraftHeinz (KHC) will report its quarterly results.
Though tomorrow’s monthly employment update from the Department of Labor will likely be the most closely-watched item from this week’s business beat, there were several releases today that garnered the interest of traders. For one, initial jobless claims met expectations for the prior week, while factory orders bounced back in June. The Institute of Supply Management’s non-manufacturing index reading, however, came in several notches lower than the consensus 57.0 estimate. Still, Friday’s report is the number to keep an eye on, and we expect to see more trading activity out of the gate in the morning.
Meanwhile, oil prices pulled back somewhat, as U.S. crude shed more-than 1% in per-barrel value amidst heightened concerns about OPEC’s ability to curb production. Though elevated demand and a gradual reduction in domestic inventories has lifted sentiment higher in the commodity market, persistent struggles by the cartel to successfully implement a drilling limit has often negated stateside stabilization. Though OPEC and its allied nations (including Russia) have committed to a 1.8 million barrel-per-day output through March, traders are reasonably skeptical of the likelihood this figure will be met across the board. In July, just a month into the accord’s extension, OPEC exported a daily-rate record of 33 million barrels.
So, with one day left in weekly trading, we see only the Dow boasting a gain thus far in the week. The S&P 500 is within striking distance of delivering a weekly gain, while the NASDAQ would need a convincing rally from the tech sector if it hopes to bounce back toward the historic levels reached in late July. We expect the bulls and bears to continue their tug of war tomorrow, with the eventual winner riding on the Labor Department’s monthly update. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
12:25 PM EDT - Equities are not making much progress today. At just past noon in New York, the Dow Jones Industrial Average has fallen back a few points, while the S&P 500 Index and the NASDAQ are showing greater losses. Market breadth is negative, with decliners ahead of advancers on the NYSE. Most of the major stock groups are in negative territory, with weakness in the energy and financial issues. In contrast, some of the consumer names are managing to advance.
It was busy day for economic news items. Specifically, initial jobless claims dipped to 240,000 for the week of July 29th, meeting analyst expectations. Elsewhere, factory orders increased 3.0% in the month of June, which was a positive development when compared to the decline posted in May. Meanwhile, The ISM Non-manufacturing Index delivered a reading of 53.9 in July, which fell well short of the consensus view of 57.0. Tomorrow, the July employment report is due out before the market opens. Traders may already be making moves, or staying on the sidelines, in anticipation of that issuance.
Meanwhile, we continue to make our way through the second-quarter earnings season. Over the past 24 hours, we heard from Tesla (TSLA). Shares of the electric car maker are moving up today, as Wall Street seems pleased with that company’s latest numbers and business outlook. In contrast, shares of Prudential (PRU) are trading lower, as investors were not impressed with the insurance giant’s report.
Technically, the stock market has been holding up reasonably well, with notable strength in the big names. This has helped the Dow Jones Industrial Average, in particular. - 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 - Following another record-breaking performance on Tuesday, and an after-the-close earnings beat by Apple (AAPL - Free Apple Stock Report) that day, it was widely expected that the equity market would start the middle session of this five-day span with formidable gains. And, indeed, that is just what transpired, as the Dow Jones Industrial Average broke through the psychologically important 22,000 barrier during the first minutes of trading yesterday morning. Not surprisingly, the early charge was led by a nine-point gain in the shares of Apple. But this is just one stock, and when that increase was not followed by a broader rally, the market wilted.
In fact, as we passed the first hour of trading, the S&P 500, the NASDAQ, the S&P Mid-Cap 400, and the small-cap Russell 2000 all had moved into the red, with the Dow, the lone remaining winner. But even that upturn had eased notably from an early 70-point plus advance to one of fewer than 30 points. Profit taking was the main culprit, it would seem, as the economic and political tidings were rather sparse and not unwelcome. The stock market then stayed range bound for several hours during the middle of the day, with the Dow generally holding to about a 40-point advance, while the other indexes remained under water.
The Dow, heavily influenced by Apple stock, which remained some 5% higher on the day, continued to hold above the 22,000 mark. Apple shares were heavily influenced both by the latest quarterly results and also the upcoming iPhone cycle 8, which is expected to begin this fall. Meanwhile, it took just 107 days for the Dow to go from 21,000 to 22,000. The biggest contributor to this additional surge has been Boeing, the aerospace and defense giant. In other news, private U.S. companies added 178,000 jobs last month, a tad below the consensus forecast of 185,000 jobs.
The private-sector payroll report is just the opening act in the employment news cycle this week, as the U.S. government will weigh in with its jobs data tomorrow morning. Forecasts hold that the nation created 180,000 positions last month, down from a 222,000 jobs gain in June. Also, the unemployment rate is expected to have ticked down from 4.4% to 4.3%. Additionally, the international trade deficit, also scheduled for release at that time, is believed to have eased a little. A solid level of non-manufacturing activity is likewise expected when that key survey is issued later this morning.
Returning to the stock market, the Dow strayed modestly above 22,000 as the afternoon progressed. The recent batch of economic reports, albeit stronger, in the main, seem insufficiently formidable to encourage the Federal Reserve to more aggressively step on the monetary brakes. The pending jobs and non-manufacturing issuances would seem to fall into that category. Current thoughts on the Fed suggest that the bank will next raise interest rates in December, making it three such increases this year. We now would expect a similar level of tightening in 2018, assuming economic growth does not slacken.
The Dow held its ground into the close, while the NASDAQ, once down more than 40 points, came all the way back, even going into the black briefly in the final hour. The S&P Mid-Cap and the smaller-cap Russell 2000, however, stayed well into minus territory, as sector rotation evolved notably. At the close, some late buying lifted the Dow comfortably above 22,000. In all, that index ended the day's action at 22,016; while the S&P 500 and the NASDAQ were, respectively, just above and below the breakeven lines, and, as noted, the S&P Mid-Cap and Russell were off on the day, while losing issues were out ahead of gaining stocks on the NYSE.
Now, a new day starts, and once again, the focus will be on earnings, which have propelled stocks strongly higher in recent weeks. But before some further heavy reporting, we see that shares were lower in Asia overnight, while in Europe, the major bourses are tracking a mixed path so far this morning. In other markets, oil is up slightly, after late gains yesterday; Treasury yields are a notch higher, following some gains a day ago; and gold is off a little. As to our futures, the early read is lower. Later on today, we would expect some focus on tomorrow's employment report. Stay tuned. - Harvey S. Katz