After The Close - Stocks turned in another weak session today, as they have been more prone to do in the past few weeks, or since the Dow Jones Industrial Average turned in an all-time closing high of 17,138 on July 16th. At the end of the day, the Dow was down 75 points, the S&P 500 was off 11 points, and the NASDAQ had dropped 20 points. Market breadth was negative, too, with decliners topping advancers by a clear margin on the Big Board and more so on the NASDAQ. But at least the market finished above its weakest levels of the day, which had seen the Dow, for example, off 110 points.
The morning started off on a positive note with a greater-than-expected falloff in the number of weekly initial jobless claims. That contributed to an early bullish feeling on Wall Street, and the Dow was up 45 points an hour into trading. Some recent backsliding in stocks made it a bit easier to make up lost ground.
But then the sinking feeling that comes when investors realized that an improving economy makes a stronger case for higher interest rates earlier in 2015 than previously thought seemed to set in. Stocks have clearly benefited from the Federal Reserve’s easy-money policies in recent years, but expectations are rising for that tailwind to become a headwind within six months to a year.
Share prices are also having a tougher time as international concerns mount. Tensions between Russia and its trading partners in the West are rising as a series of punitive and retaliatory economic sanctions takes hold. Europe is not experiencing all that robust a recovery as it is. There are legitimate worries that the tensions could boil over and escalate into full-fledged fighting between Ukraine and Russia. Such a breakdown could hurt economic activity in the broader euro zone even further.
Overall, the combination of fears that the Fed may need to act sooner than it might have as the economy strengthens and uneasiness over rising geopolitical strains has given the bears the upper hand lately, including the bulk of today’s trading.
Still, the bulls have precedent on their side. This isn’t the first time the investment backdrop has shifted from one being driven by low interest rates to one more fully reliant on the strength of the economy and corporate earnings. In that respect, there is clearly a case to be made that the bull market will reassert itself once the current transition period is worked through. – Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:30 PM EDT - The U.S. stock market opened higher today, but has been unable to hold its gains. It should be noted that the market has been quite choppy lately, often shifting direction during the course of the day, and that suggests that traders lack clear direction. It is not clear what will offer guidance, as the second-quarter earnings season is now ending and some traders may be taking a break to enjoy the last weeks of summer. At just past noon in New York, the major averages are mixed. The Dow Jones Industrial Average is off 48 points; the broader S&P 500 Index is down six points; and the NASDAQ is virtually flat. Market breadth shows a mixed tone to today’s session, with advancing stocks about even with decliners on the NYSE. Most equity sectors are struggling, with pronounced losses in the healthcare and basic materials issues. In contrast, the utilities are up nicely and the industrials are moving higher.
Technically, the market seems to be fairly stable, but unable to rebound. Nonetheless, the Dow Jones Industrial Average seems to have found support near its 200-day moving average, located at 16,344, but the S&P 500 Index is now at its 100-day moving average, located at 1,914. These levels are widely watched by technicians, and it remains to be seen if they will hold.
Meanwhile, today’s economic news was somewhat constructive. Initial jobless claims for the week ended August 2nd came in at 289,000 which was down from the prior week’s reading, and was also lower than had been anticipated. Weekly continuing claims showed improvement, suggesting that the employment situation is on the mend.
It should be noted that the economic outlook in Europe is less favorable than it is on our shores, with Italy now officially in a recession. Further, news that the ECB will maintain the current interest rates may have been a disappointment. Also, many are concerned about the situation in Ukraine and the sanctions placed on Russia.
In corporate news, things were relatively quiet today. Nonetheless, Thoratec (THOR) stock is sinking after the medical supplies company put out a weak report. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Stocks to Watch from The Survey: Today is set to be another busy day on Wall Street, with investors digesting a slew of earnings reports. Keurig Green Mountain (GMCR), will be of particular interest. Indeed, the coffee brewing systems maker raised its full-year outlook after announcing better-than-expected fiscal third-quarter earnings. However, the top line came up short of consensus in the most recent period and the stock has experienced some weakness in pre-market trading. Generic drugmaker Mylan is also expected to open in the red after announcing that higher costs and delays in FDA approvals would likely cause it to come up short of current quarter expectations.
On a positive note, Twenty-First Century Fox (FOXA) is up ahead of the bell after the media and entertainment conglomerate reported a better-than-anticipated fiscal fourth-quarter profit just a day after ending its pursuit of Time Warner (TWX). TWX, on the other hand, has come under some pressure. Oilfield services company Transocean Ltd. (RIG) is another name to keep an eye on. The company handily beat second-quarter estimates. Meanwhile, investor sentiment is likely to perk up for Bank of America (BAC), which is said to be nearing a deal with the Justice Department to settle allegations of mortgage-related misconduct during the financial crisis.
In other news, Chinese online travel company Ctrip.com Int’l (CTRP) is likely to see increased interest after industry heavyweight Priceline Group (PCLN) said it was taking a $500 million stake in the company. Shares of restaurant chain Wendy’s Company (WEN) are also expected to be heavily traded after reporting a slight earnings miss, reaffirming its full-year guidance, and announcing that it plans to sell its company-owned stores in Canada. -Andre J. Costanza
At the time of this article’s writing, the author did not have positions in any of the company’s mentioned.
Before The Bell - After tumbling on Tuesday on geopolitical concerns in the wake of the latest threats coming out of Russia in regard to sanctions imposed against it by Europe and the United States, and following some sharp reversals during the overnight hours and early in the morning offshore (with Europe doing more poorly than Asia), it looked as though our stock market would follow the sizable Tuesday declines and head lower again yesterday.
And, on cue, that is just what the key indexes did at the opening bell. But the losses were not nearly as large as had been implied by the poor action in the futures. In fact, the Dow Jones Industrial Average, a 140-point loser on Tuesday, headed lower by just a modest 60 points early on yesterday. And then, the equity market stabilized, with traders seemingly emboldened when stocks did not have a follow-up meltdown.
In fact, within an hour, or so, the market started to rebound, with the Dow at one point gaining more than 50 points. The NASDAQ, in the meantime, also marched somewhat higher, as did the Standard and Poor's 500 Index. But sentiment did not change to the degree necessary to generate a major upside breakout in the averages. In fact, stocks moved in and out of the black in the middle portion of the trading day, although largely maintaining a modestly positive bias.
In large part, the latest attempt by the bulls to make a stand reflected an ability to shrug off the latest geopolitical events and focus on the fundamentals, such as quarterly earnings, which continue to flow in, albeit at a lesser rate than a week or two ago, and the economy. On this latter count, the latest session contained some constructive news in the form of a nice reduction in the nation's trade deficit. Of note, the trade gap narrowed from $44.7 billion in May to $41.5 billion. Expectations had been for a slight increase in the shortfall, to $45.0 billion. The $41.5 billion gap, meanwhile, was the smallest since January, when the imbalance was $40.1 billion. Meanwhile, with regard to earnings, the headline name reporting after-hours Tuesday and affecting the market yesterday, was entertainment mogul and Dow-30 component Walt Disney (DIS - Free Disney Stock Report). That company easily outdistanced most estimates and the stock initially rode a wave of optimism higher, but eased off somewhat in late dealings to close the day off a tad. Earlier, the stock had come within a whisker of making yet one more all-time high.
On the whole, though, the stock market's uneven performance has been largely a result of the waxing and waning of the continuing series of global crises, most notably the escalating confrontation involving Russia and the West, the selective easing in the European economies (where Italy has slipped back into recession), and the step-up in fighting across the Middle East. Throw in some lingering nervousness regarding the seemingly ill-defined plans of the Federal Reserve with respect to interest rates, and it is not hard to see why Wall Street has been so up in the air recently.
As to the overall market action yesterday, the Dow, after some earlier gyrations, finally ended up with a gain of 14 points, while the NASDAQ added two points. The S&P 500 Index was essentially unchanged, while the small- and mid--cap indexes rose grudgingly. Thus, while we did not recover much of Tuesday's drubbing, the good news for those long equities, is that we did not put together back-to-back losing days. The long-suffering bears will, apparently, need to put in some harder work.
Now, peering ahead to a new day, we find that the markets were largely in the red in Asia overnight, while they are pressing more notably lower in Europe thus far this morning. The markets now await a press conference from the European Central Bank (ECB). It should be noted that the ECB has left key interest rates unchanged. Russia also is in the news as that country has revealed the specifics of its food-import ban. As to our markets, they seem to be shrugging off all this downbeat news and the equity futures are now marching broadly higher, with the S&P 500 Index futures ahead by almost nine points and with the NASDAQ futures to the good by some 17 points, all of which would seem to presage a strongly higher opening when trading gets under way in less than an hour from now. - Harvey S. Katz