After The Close - The U.S. stock market registered a broad-based decline on Wednesday, largely due to heightened tensions between the United States and North Korea, as well as a stream of disappointing earnings reports from Corporate America. With about 30 minutes left in yesterday’s session, President Trump made remarks to reporters that indicated the country may take a more bellicose posture when it comes to the foreign nation, sending the major averages to negative territory and offsetting the fundamentals that appeared to support another multiday running of the bulls. This development loomed over the market all day today, especially in small-cap trading, with declining stocks roughly tripling their advancing counterparts.
But geopolitical tension was not the sole reason today’s downturn. Rather, soft releases from Disney (DIS - Free Walt Disney Stock Report), Priceline (PCLN), Office Depot (ODP), and several others has pulled down the indexes today, with the former being a major drag on the Dow. Investors were disappointed by the quarterly revenue miss and ostensibly not convinced that the conglomerate’s aggressive streaming push, and the elevated research and development expenses that come with it, is the answer to its cable television woes. The bulls are hoping the lineup of retailers set to make their quarterly announcements over the next few days will help to rejuvenate the suddenly sluggish stock market.
Meanwhile, the oil market offered something of a silver lining today, albeit a slight one. U.S. crude ticked $0.39 higher in per-barrel value after a report showed domestic inventory levels fell last week at a much wider rate than anticipated (6.5 million vs. 2.7 million). Still, concerns abound that compliance of OPEC’s drilling accord is declining. The modest rise to $49.56 a-barrel probably also reflects investors looking to buy in before the commodity eventually hits the $50 threshold.
In sum, news from the political sphere outshined a still-bright corporate earnings season. We expect the bulls to rebound on Thursday, though the escalation of words between the nations will likely bring more uncertainty to the market. At the closing bell, the indexes had pared their losses to varying degrees. The NASDAQ registered the widest loss among the large-cap composites, while the S&P 500 managed to climb back within a few points of its breakeven line for the day. Stay tuned. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
12:10 PM EDT - The stock market opened lower this morning, and has been struggling to pare its losses, with little success. At just past noon in New York, the Dow Jones Industrial Average is down 72 points; the broader S&P 500 Index is off seven points; and the NASDAQ is lower by 32 points. Market breadth is negative, with losers well ahead of winners on the NYSE. The major market sectors are showing losses, with significant weakness in many of the consumer and financial issues. Meanwhile, the healthcare names are displaying a degree of relative strength today.
Elsewhere, a few economic news items were reported this morning. Specifically, according to the preliminary figure, productivity increased 0.9% in the second quarter, which was a bit ahead of expectations. In addition, wholesale inventories rose 0.7% during the month of June, which was in line with the consensus view. Tomorrow, we will get a look at the Producer Price Index for the month of June. Initial jobless claims for the latest week on record will also be released.
Finally, the second-quarter earnings season continues to dominate the headlines. Of note, shares of Disney (DIS – Free Disney Stock Report), Priceline (PCLN), and Monster Beverage (MNST) are all trading lower today in response to earnings reports that were somewhat disappointing. Given the size of these companies, the recent news may be hurting market sentiment today.
Technically, stocks have been holding up well, for the most part. However, as the second-quarter earnings season winds down, and geopolitical tensions rise, it remains to be seen if the bulls can maintain the upper hand. - 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 a mostly higher beginning to the trading week on Monday, Wall Street got off to a somewhat weaker start yesterday, with the Dow Jones Industrial Average, a 26-point winner on the first session of the week, moving down to a 40-point loss in early dealings. With the economic calendar light and no new political headlines of note until late in the day, the focus was again on earnings, which continue to pour in for the second quarter. To be sure, most of the nation's larger companies have reported already. Now, we are starting to hear from some smaller names, as well as results from a few retailers, which often have July ending periods.
As has been the case almost uniformly, however, the bulls didn't stay down for long, and as we ended the first half hour of trading, the early setback was pared, although the indexes remained a bit under water. That would change in the next half hour, as the Dow would make it back into the black, with the bulls hoping for a 10th straight record close. Meantime, the big item of note on the earnings calendar was yesterday afternoon's pending quarterly release from Dow stock Walt Disney (DIS - Free Disney Stock Report), which is noted below. Some retailers also were on the docket, as noted above.
Indeed, with respect to the latter item, the retail reports made surprisingly good reading, with better-than-expected results from both Ralph Lauren (RL) and Michael Kors Holdings (KORS) helping to turn things around as the morning wound down. In fact, as we approached the noon hour in New York, all three large-cap indexes were securely in the green, with the Dow seemingly on course for a 10th straight record close, with a mid-session gain of some 50 points. All told, corporate earnings have been up some 10% for the second quarter, which is well ahead of the 6% increase that has been forecast. Little wonder stocks are strong.
The good news would continue into the first part of the afternoon, affirming that when the focus is on earnings, rather than politics and even the economy, this overbought stock market has continued to do well. And yesterday, the gains extended to the S&P 400, the mid-cap benchmark and the small-cap-dominated Russell 2000. Meantime, the gains increased in the first part of the afternoon, with the Dow's intraday uptick reaching 60 points. But that would prove to be the high water mark for stocks, and as the afternoon moved along, the sellers entered the fray. However, there was little intensity to that pullback.
The mid-afternoon selloff, albeit modest, did continue into the close, with the energy and basic materials sectors leading the way lower, with an assist from health care. Few groups showed any noteworthy strength, although recently soaring Apple Inc. (AAPL - Free Apple Stock Report) shares did press ahead to an all-time high of just over $161. Still, while the Dow and the S&P 500 Index both set intraday peaks, each fell back below the neutral line in the final hour of trading--especially during the closing half hour. Also, losing stocks held a plurality on winning issues on the Big Board and the NASDAQ. The late selloff, meanwhile, was driven largely, it would seem, by a statement from the President warning North Korea that any threats to the United States would be met with "fires and fury."
The weakness then accelerated somewhat into the close, with the Dow at one time dropping by some 60 points. So, when all the numbers were added up, the blue chip composite was off by 33 points; the S&P 500 Index was lower by six points; and the NASDAQ's deficit was 13 points, as more stocks fell than gained on the session. Then, after the close, Disney chimed in with a profit beat, but a shortfall on the revenue side, causing that stock to falter in after hours trading. That setback could pressure equities early today.
Meanwhile, in overseas dealings today, stocks were lower in Asia overnight, on worries about North Korea, while in Europe, the leading bourses are down sharply so far this morning on these global concerns. Elsewhere, oil prices, off slightly in late dealings yesterday, are showing strength so far this morning. Also, gold, often a safe haven in times of global stress, is up notably thus far today, while Treasury yields are down in a flight to safety. Finally, on our shores, U.S. futures are now trading lower, presaging a weaker start to the session today. - Harvey S. Katz