Stock Market Today: December 19, 2013
After The Close - Stocks had a tough act to follow today after yesterday’s blistering performance that saw the Dow Jones Industrial Average finish at a record closing high. Some mixed economic news kept investors on the defensive for much of the session, too. At the close, the Dow Jones Industrial Average managed a gain of 11 points, but the NASDAQ was in the red by 12 points. Market breadth was negative, as well, with more stocks falling than rising on both the New York Stock Exchange and the NASDAQ.
Not one of the four major economic data points released today topped expectations, with initial jobless claims rising more than thought and existing home sales dropping more than forecast. Meantime, a business survey for the Philadelphia region showed less progress than projected. The estimated a rise in the nation’s leading economic indicators came in on target, though.
Such uninspiring results on the business front are not the stuff rallies on Wall Street are generally made of. That is particularly so when investors are looking for a handoff from a market supported by extremely aggressive monetary stimulus measures to one driven by strength in the economy and corporate profits.
Rising bond yields also provided some resistance for stocks. Despite the disappointing economic numbers, the yield on the 10-year Treasury note rose from 2.89% to 2.93%, likely prompted by the view that yesterday’s Federal Reserve move to taper its bond-buying program will contribute to higher interest rates over time.
The rise in bond yields was felt most acutely among utilities stocks, which are often viewed as substitutes for bonds. Shares of power companies, such as First Energy (FE), fell broadly as a result.
News from the corporate front produced an uneven tone today, as well. Word that Facebook’s (FB) founder planned to sell some shares pressured shares of the social media stock, for instance.
Elsewhere, Darden (DRI) shares fell when the restaurant operator missed profit expectations. The stock of drugstore owner Rite-Aid (RAD) pulled back too, despite strong earnings, when the company reduced its profit estimate for the full year.
On the upside, Oracle (ORCL) beat earnings estimates, providing support for its shares. Nevertheless, despite the day’s unimpressive showing, stocks did well to hold on to most of yesterday’s big gains. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:25 PM EST - The U.S. stock market is trading lower today, following yesterday’s Fed-inspired move up. The major averages are currently well off their session lows, which is encouraging. However, it remains to be seen if the bulls can manage to follow through with additional gains. At past noon in New York, the Dow Jones Industrial Average is off six points; the broader S&P 500 Index is lower by four points; and the technology-heavy NASDAQ is down 15 points. Market breadth still indicates some minor weakness to the session, as declining stocks are outweighing advancers by about two to one on the NYSE. The figures look a bit more favorable on the NASDAQ. Meanwhile, weakness can be found distributed through most of the market sectors. The consumer names are quite weak, with losses in the auto area. Also, the financials are declining, with weakness in the real estate-related issues. Meanwhile, the basic materials are bucking the downtrend today, and based on recent strength, this will likely be an important group to watch. The technology issues, too, are displaying a bit of relative strength.
Technically, the S&P 500 Index, and the other large averages, jumped considerably yesterday. Importantly, that move was accompanied by strong trading volumes, suggesting some commitment on the part of traders, many of whom were likely waiting in the sidelines for the Fed’s decision. As noted, we will now have to see if further gains are in store, especially as the holiday week approaches. The VIX, now reading 13.35, is moving lower again today, suggesting the mood may be more positive.
Traders received numerous economic reports to digest today, and the results were a bit mixed. For one, weekly initial jobless claims moved up to 379,000 for the week ended December 14th, which was a bit higher than expected. Also, existing home sales for the month of November came in at 4.9 million units, down from the prior month’s reading, and also a bit short of expectations. On a more positive note, the leading economic indicators release for November suggested some progress. Also, the Philadelphia Fed Survey for the month of November showed that region’s economy is doing a bit better than had been widely anticipated.
In corporate news, we heard from a few big names today. In the technology sector, Oracle (ORCL) stock is up, after that company produced strong quarterly results. But, Facebook (FB) shares are trading lower on news of a common stock issuance. - 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 – Investors are digesting some more earnings news today. Early indications are that Wall Street was pleased with quarterly results from software developer Oracle (ORCL), consulting company Accenture (ACN), payroll services provider Paychex (PAYX), packaged foods company ConAgra (CAG), and recreational vehicle manufacturer Winnebago Industries (WGO), as all of these stocks are up ahead of the bell. Conversely, shares of drug store retailer Rite Aid (RAD) and restaurant operator Darden (DRI), which also announced plans to spin off its Red Lobster business, are moving lower in pre-market trading on earnings news. – 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 - Stocks drifted modestly higher through the morning hours yesterday, but this half-hearted rally attempt began to fade as we reached the noon hour along the East Coast, before faltering a bit further, as we moved into the afternoon. Helping the early mood on Wall Street, in part, was optimism about the housing market. That improved sentiment followed an upbeat release on housing starts and decent data on building permits. More to the point, though, there was hope the Federal Reserve, which was bringing to a close its two-day Federal Open Market Committee (FOMC) meeting, would vote to keep its popular bond-buying initiatives in place, or at most opt to only slightly taper the program. Going into the two-day Fed confab, the guessing had been about 50-50 as to whether or not the central bank would vote to slow down the buying process.
The mid-session pullback pushed the Standard and Poor's 500 Index and the tech-laden NASDAQ into the minus column and then lowered the Dow Jones Industrials into the red for a time, as well. This mild selloff was brought about, we sense, by fresh fears that the FOMC meeting, which was to conclude at 2PM (EST), would result in the lead bank opting to start the tapering process a little more aggressively. Then, at the appointed hour, the Fed announced that it was now ready to slow the accommodative process, but just slightly. In all, the bank said that beginning in January, it would buy $75 billion a month in Treasuries and mortgage-backed securities, down from $85 billion heretofore. The central bank based this decision on the aggregate improvement in the economy over the last few months, notably in the better employment outlook. The Fed also said it would keep interest rates at historically low levels even after the jobless rate fell below its target of 6.5%.
This was the decision that the bulls were not exactly wild about initially, but it was also not the dire result of a major tapering effort that they had been fearing. For many in the investment world, however, this modest shift was still not enough, even if it is likely to continue over the next year.
And the impact on Wall Street was uneven at first. On point, stocks initially sold off, with the Dow heading lower by some 60 points in the first few minutes after the decision was released. But upon reflection, the bulls, sensing the Fed will continue to go slowly on the bond-buying slowdown and interest-rate fronts, decided that the outcome was good after all, and stocks turned once again, this time soaring to a session high in the Dow of nearly 300 points, and winding up the day near its best levels. The reaction on the S&P and the NASDAQ was also positive, but a little more restrained, especially in the latter. All told, by the end of the trading day, the Dow was ahead 293 points; the S&P 500 Index was better by 30 points; and the tech-heavy NASDAQ was by 46 points. As would be expected, the gains were spread widely, with the small- and mid-cap names participating, too, while the VIX volatility index, also known as the fear gauge, tumbled by nearly 15%, as the desire to assume risk rose sharply on the day. Importantly, bond yields hardly moved, and that also emboldened the bulls.
Going forward, our sense is that the Fed will continue to taper, but it also left itself plenty of room to adjust the pace and extent of future moves. We believe that the program will conclude next year, assuming that the business expansion stays on course and that inflation remains subdued. For now, the ball is entirely in the bulls' court, notwithstanding the high level of valuations and the frothy and overbought nature of the market.
Looking ahead to a new day, and after some nice follow through this morning in Europe, but just a mixed performance in Asia overnight, we can look forward to another key housing metric issuance within the next 90 minutes, as the National Association of Realtors is set to issue November data on sales of existing homes. Expectations are that sales eased back modestly last month from October's 5.12 million annual unit run rate. Also, at that time, we are scheduled to get the latest data on the Index of Leading Indicators, where a strong 0.8% gain is expected. Finally, tomorrow, the Commerce Department will release its final revision to third-quarter GDP. Expectations are that this issuance will show that growth remained at a solid 3.6% rate, as it had in November.
As to our market, yesterday's heroics have left equities further overbought and even frothier from a valuation standpoint. That said, markets can stay richly capitalized for lengthy periods of time, just as they can remain undervalued for a long time, as they did in 2008 and early 2009. All of this aside, the equity futures are now pointing to a mixed start in about an hour from now. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.