Loading...
 

 After The Close - The investment community was taken on a rollercoaster ride this week, but when all was said and done, the major equity averages were not too far removed from where they started five-day stretchy. All week long, investors weighed some positive news on the economy and some constructive earnings reports from Corporate America against the international concerns about the escalating geopolitical tensions and fighting in the Middle East and Ukraine and growing sentiment that the Federal Reserve may be more prone to raise interest-rate earlier than initially expected in 2015. The narrative on Wall Street that appears to be unfolding is that we are likely in the midst of what will be a volatile stretch of trading, especially with the second-quarter earnings season drawing to a close. That said,

Today’s trading session clearly went to the bulls, helped by word this afternoon that Russia has ended its latest military exercises on the Ukraine border. For those long equities, there was much to like, especially after a few difficult stretches earlier in the week. By the closing bell, the Dow Jones Industrial Average, the tech-heavy NASDAQ, and the broader S&P 500 Index were 186, 36, and 22 points higher, respectively. The buying really picked up in the second half of the session and made for a winning week on Wall Street. Both small- and large-cap stocks performed well, and the market breadth favored the advancers by a considerable margin on both the Big Board and the NASDAQ.

Not surprisingly, given the spread between winning and losing issues, all of the top-10 sectors finished in positive territory. The leadership came from a few groups that have not performed very well of late, most notably the energy and utility issues. Those sectors, along the consumer discretionary stocks, were in high demand today.

As noted, the economic news of late, including reports on manufacturing and nonmanufacturing activity within the last week, has been very encouraging—and is probably a big reason why the U.S. stock market has not sold off as much as some of the bourses in Europe, many of which have entered that 10% correction stage . Today was no different, as the Department of Labor reported that U.S. workers were more productive in the April-June quarter and labor costs rose nominally, which was in stark contrast to weak first-quarter figures. The 2.5% rise in productivity was yet another indication that the U.S. economy is growing, despite a less-than-ideal situation overseas. Next week, we will get a few noteworthy reports on the economy, with data due on retail sales on Wednesday and the latest readings on producer (wholesale) prices and industrial production on Friday. The data on producer prices will be closely monitored to see if inflationary pressures are picking up. This report, along with the monthly employment figures, are scrutinized by the central bank in determining monetary policies.

Meantime, the second-quarter earnings season is nearly in the record books. The only Dow-30 companies yet to release their quarterly results are Home Depot (HD Free Home Depot Stock Report), Cisco Systems (CSCO Free Cisco Stock Report), and Wal-Mart Stores (WMT Free Wal-Mart Stock Report), but the latter two entities are on the docket next week. The reports from the retailers will also begin flowing in. Shares of The Gap (GPS) rose today after the retailer said that sales rose nicely in July and the investment community should expect good results when it reports on August 21st. Overall, the earnings season has been a constructive one and probably, along with the news from the business beat, has helped crimp some of the event-driven selling on international concerns.  - William G. Ferguson

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

-

2:15 PM EDT - As the old song goes, what a difference a day makes. Well, on Wall Street, the past 24 hours has seen a sea change in sentiment, and, in response, a markedly different reception for stocks.

To wit, after the market hit the skids early yesterday and spent much of the balance of the session well into the red, the bears were a confident lot going into today. After all, the Dow Jones Industrial Average was now working on a three-week losing streak.

But that gloating did not last very long, as the buyers came back in this morning, albeit somewhat cautiously at first. However, they  have now stepped up their buying during the early afternoon hours. And, as we approach the final 90 minutes of the trading day and week, the Dow is now up 143 points; the S&P 500 Index is ahead 17 points; and the NASDAQ is 30 points to the good. Gaining stocks, moreover, are now well ahead of losers, and the Dow is currently back in positive territory for the week.

What has led to this shift in sentiment. In a word, it has been Russia, which has reportedly ended its latest military exercises in Ukraine, thereby defusing the latest crisis to a degree. Thus, while we are not out of the woods by any stretch of the imagination, the worst of the strife has at least passed for the time being.   - Harvey S. Katz

At the time of this article's writing, the author did not have positions in any of the companies mentioned.

-

12:05 P.M. EDT - The U.S. stock market got off to a choppy start this morning, but is now pressing higher. At just past noon in New York, the Dow Jones Industrial Average is ahead 71 points; the broader S&P 500 Index is up eight points; and the NASDAQ is up nicely, as well. Market breadth now suggests some underlying strength to the session, as advancing issues are ahead of decliners by about two to one on the NYSE. Notably, many equity sectors are making progress. Specifically, some of the consumer names are showing leadership. Also, the utilities are advancing. Meanwhile, the broader technology sector is ahead, but lagging.

It is likely worth pointing out that the financial markets overseas put in a weak performance overnight, and that may have weighed on the U.S. markets earlier today. Notably, Japan’s Nikkei plunged about 3%, on concerns about the economy there. Too, on the Continent, the bourses struggled through the session. Further, ongoing political tensions in numerous places around the globe remain a concern for many investors.

Technically, the market has been struggling a bit lately. While the bulls have shown some support for equities in recent days, they have not yet mounted a major buying campaign. It may well be that further consolidation is needed before this happens. It should be noted that market sentiment has become less bullish, as the VIX has moved up quite a bit from the extremely low readings seen in early July. Eventually, the market will likely become “oversold” and that my prompt some bargain hunters to move in, possibly paving the way for a rally.

Meanwhile, traders received a few economic reports this morning. Specifically, wholesale inventories increased 0.3% in June, which was just a bit below analyst expectations. In addition, according to the preliminary reading, productivity rose 2.5% in the second quarter, which slightly exceeded estimates. Next week starts out quietly, with pending home sales for June due out on Monday.

Finally, investors are still looking at corporate earnings releases, even though the season is largely over. We recently heard from CBS Corp. (CBS). That stock is up slightly as traders were encouraged by the media giant’s 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 There is some earnings news to be aware of today, and the most disappointing reports appeared to come from Zynga (ZNGA) and Post Holdings (POST). The video game developer and cereal maker both released second-quarter results that were weaker than anticipated, and Post also offered guidance that fell well short of expectations. Consequently, both equities are down sharply ahead of the bell. The news is better elsewhere, however, and investors seemed pleased with quarterly results and/or outlooks from semiconductor company NVIDIA Corp. (NVDA), energy drink maker Monster Beverage (MNST), film studio Lions Gate Entertainment (LGF), apparel retailer The Gap (GPS), and alternative energy company SolarCity (SCTY). All of these stocks are moving higher in the premarket, as a result.

In other news, lululemon (LULU) founder Dennis Wilson has agreed to sell half of his stake (13.85% of shares outstanding) in the retailer of yoga-inspired athletic clothing and accessories to private-equity firm Advent International for $845 million. Mr. Wilson has had a contentious relationship with other members of lululemon’s Board of Directors in recent months, and Wall Street appeared encouraged that this deal could bring more stability to the company. LULU stock is up nicely in the premarket, in response. – Matthew E. Spencer

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 put in one of its increasingly frequent reversals yesterday, only this time, unlike the experience on Wednesday, the turnaround was all to the downside, and notably so. To wit, the market started the day higher on further optimism about the economy. This surge of good feelings was based partly on the fact that weekly jobless claims fell further below 300,000. The report, issued an hour before the start of the trading day, was yet one more piece of good economic news that suggests the second-quarter spike in GDP growth, to 4.0%, was not an aberration.

However, after that brief push higher, which saw the Dow Jones Industrial Average jump to an early gain of some 60 points, the sellers abruptly reappeared. The reversal was, in part, caused by the deteriorating situation between Russia and Ukraine. Not only did U.S. stocks falter anew, but investors rushed into such safe havens as gold and Treasuries. Yields, in response, fell, with the benchmark 10-year Treasury note dropping all the way down to a minuscule 2.42%, which is very near its 52-week nadir of just over 2.40%.

The selling then continued into the mid-session hours, with the Dow, for example, tumbling to a loss of 110 points, for a peak-to-trough reversal of some 170 points. Also, the Standard and Poor's 500 Index shed more than 15 points, tumbling to its worst level in more than two months. The Dow, for its part, fell to more than a three-month low. For the year to date, this 30-stock blue chip composite is now off 1.3%. The S&P 500 Index is ahead just 3.1%, while the NASDAQ is up 3.8%. The bull market is still intact, but the confidence of investors has likely been shaken somewhat.

Of course, geopolitical issues are not all that are stressing out weary investors these days. So, too, are earnings misses and revenue shortfalls. Although these are still in the minority for the fast-winding down earnings season, there are enough of them to unnerve even the most intrepid of investors. Also, there is the economy, which continues to give off positive signals. And although that is welcome news, it also raises the possibility that the Federal Reserve could always advance the starting date for raising interest rates from a presumed mid-2015 to earlier in the upcoming year.

Whatever the concerns, there are enough of them around now to start taking the measure of the bulls, and the first sounds of the feared word correction are starting to be heard. Of course, we are a ways from that event, which is generally considered to be a 10% drop in the major averages, as the cumulative decline in the Dow is now less than 5%. It is just over 4% in the more broadly configured Standard and Poor's 500 Index. Where we proceed from here is, as always, up in the air, but with earnings season now all but concluded and the economy showing few near-term wrinkles, our sense is that the global outlook and Federal Reserve musings will be front and center when it comes to market moves. 

As to the full day's action, the Dow, which bounced modestly off of its mid-session lows, still closed off by 75 points; the S&P 500 Index eased by 11 points; and the tech-laden NASDAQ dropped 20 points. Meanwhile, of the ten major market sectors, nine fell yesterday, with the biggest losses in healthcare and basic materials. Only the utilities gained, as investors rushed in to gobble up their attractive yields, as competing fixed-income instruments, such as Treasuries, rose in price as yields withered further. Decliners also led advancers on both the Big Board and the NASDAQ, with the unfavorable ratio on the latter composite approaching two-to-one.       

Looking out at the new day, we find that stocks generally fell sharply in Asia overnight, with particular weakness in Japan. In fact, Japan's Nikkei tumbled more than 3%. Stocks in Europe likewise are pulling back notably. Here, the biggest casualty so far is Germany's DAX, likely reflecting its greater proximity to Ukraine and Russia. Meanwhile, back on our shores, a dichotomy of sorts is evolving, as the S&P 500 futures are climbing, gaining more than eight points at this hour, while the NASDAQ futures are currently backtracking, easing off by more than seven points, suggesting that there is suddenly a marked aversion to risk. Thus, an uneven start to the trading day would seem ahead, when the bulls and the bears get going in less than an hour from now.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.