After The Close - The U.S. stock market opened sharply lower today. However, the major averages managed to pare their losses considerably. At the end of the day, the Dow Jones Industrial Average closed off 71 points; the broader S&P 500 Index lost eight points; and the NASDAQ surrendered 23 points. The tone was negative, as declining stocks outnumbered advancers by about two to one on the NYSE. Further, weakness could be seen throughout most of the market. Specifically, there were sharp declines in the basic materials sector. Some of the consumer names also lost ground. Nonetheless, the utilities managed to buck the downtrend, as investors turned to these defensive holdings.
It should be noted, that the weakness in the U.S. market today got its start overseas. Specifically, the European bourses traded sharply lower earlier in the day. Investors became worried about Portugal’s banking system, as a large bank in that country failed to meet its obligations. Too, the euro weakened against the dollar today, as a result of the news.
Technically, stocks have struggled a bit this week. However, the pullback in equity prices has been modest, and the market has been quite orderly. From here, it remains to be seen if the bulls will move in to support equities at the current levels. No doubt, much will depend on the quality of the corporate earnings reports soon to be released.
Traders received a few decent economic reports this morning. However, the results were largely overlooked. Specifically, jobless claims for the week ended July 7th came in at 304,000, which was below the prior week’s figure, and lower than had been anticipated. Elsewhere, wholesale inventories increased 0.5% in May, meeting expectations. Meanwhile, tomorrow should be a light day for economic news.
Finally, investors received a few earnings warnings today, and that did not help matters. Specifically, Lumber Liquidators (LL) saw its stock plunge, after the home-improvement retailer warned that its second-quarter figures would fall short of expectations. Further, Potbelly (PBPB) stock was off sharply, after the sandwich-maker lowered its guidance. Tomorrow, we hear from banking giant Wells Fargo (WFC). - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:00 PM EDT - Stocks tumbled at the opening bell today on fears that banking woes in Portugal might spread, but have since bounced off of their worst levels of the session. Right around the noon hour on the East Coast, the Dow Jones Industrial Average is off 103 points, the NASDAQ is down 29 points, and the S&P 500 is in the red by 11 points. Market breadth is decidedly negative, as well, with decliners still swamping advancing issues on both the Big Board and the NASDAQ.
Traders are having a tough time assessing how serious the situation in Portugal is, and whether it could lead to the type of feared contagion that could spread to banks in other countries. The Bank of Portugal, the nation’s central bank, has indicated that troubles at Banco Espirito Santo should be contained, but investors are nevertheless not in the mood to hear about problems.
Wall Street was already skittish about the earnings season getting under way as the week opened. Stocks fell on Monday and Tuesday before regrouping yesterday after a good earnings report from aluminum giant Alcoa (AA) and reassuring words from the Federal Reserve.
But today’s volatility is more in line with how stocks have performed over time after receiving disturbing information. The lack of any news in recent months that could agitate investors was a bit unusual.
The selloff has boosted demand for safe havens, such as gold, utilities stocks, and government bonds.
Most sectors are off notably, with energy stocks faring the worst. Oil prices have been sliding for more than a week with word that shipments from Libya are getting closer to being resumed. Two ports in Libya that have been closed for more than a year are being reopened after rebels last week agreed to end a blockade. That could potentially raise the nation’s oil exports by 500,000 barrels a day.
Crude prices have also eased as fighting in Iraq has not come closer to threatening that country’s southern oil fields.
Overall, if the situation in Portugal does blow over, today’s stock-price retreat could prove a buying opportunity. Some investors who stayed on the sidelines during the stock market’s latest historic run and others underweighted in equities had been looking for a chance to get in the market. But the ride may not be as smooth as in the recent past. – Robert Mitkowski
At the time this article was written, the author did not have positions in any of the companies mentioned.
11:00 AM EDT - Wall Street opened on a sharply lower note this morning, but has since started to recover from its worst levels of the morning. On point, the Dow Jones Industrial Average, off by about 180 points, initially, has recouped about half of that early loss, being lower by a more modest 90 points, as we pass the 90-minute mark of the trading day. Also, the NASDAQ, once down by almost 70 points, has about halved that deficit, as well.
Behind that early selloff were mounting concerns about Europe, where the economic news out of Germany, the Continent's largest business factor, has been underwhelming for days. Now, we learn that banking woes are again flaring up in Portugal, while industrial output figures in France and Italy are becoming worrisome.
As to the markets, nine of the 10 major groups are still in the red, with just the utilities gaining ground, and with the energy and basic materials sectors leading the way lower. Not surprisingly, losing issues are swamping gainers on the Big Board to the tune of about four to one.
Thus, while we are off of our worst levels of the day, the bulls are still noticeably on the defensive, at this hour. - Harvey S. Katz
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 – After several quiet days, corporate news is heating up, and a number of stocks will likely see active trading today. Several companies, including flooring retailer Lumber Liquidators (LL), restaurant operator Potbelly (PBPB), and Tractor Supply (TSCO), a seller of products for farms, pets, and livestock, all trimmed their outlooks ahead of second-quarter earnings season, with Lumber Liquidators and Potbelly issuing the most disappointing guidance. Consequently, LL and PBPB are plunging ahead of the bell, while TSCO’s losses appear to be less severe. Actual earnings were not great either, and shares of Family Dollar (FDO) and WD-40 (WDFC) are down in the premarket, after the discount retailer and multipurpose lubricant manufacturer released May-period financials that did not sit well with investors. The stock of L Brands (LB) is also indicating a notably lower opening this morning, after the Victoria’s Secret parent announced lackluster sales data for the month of June. One of the few snippets of good news came from Zumiez (ZUMZ), which increased its July-period guidance and impressed Wall Street with its June comparable-store sales. Shares of the company, which sells action-sports related clothing, equipment, and accessories, are moving nicely higher ahead of the bell, as a result. – 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 opened to the upside yesterday, as traders tried to put a two-day losing streak. And early on, the equity market did march nicely higher, with the Dow Jones Industrial Average gaining some 60 points during the first 15 minutes, or so. However, those initial modest gains had difficulty holding, so that within a half hour, or so, most of the advances had given way, and there were a few red arrows among the averages starting to appear.
The market then weaved in and out and back and forth, never regaining that early momentum--at least in the morning hours--nor falling too far below the neutral line. Wall Street, it seems, is waiting with some trepidation for the pending start of second-quarter earnings season, which basically unfolds next week. That is when a number of major corporate players will be issuing their latest metrics. In an early indication of what the bulls hope will be a trend, aluminum maker Alcoa (AA) easily beat expectations.
Once again, a relatively weaker performance was authored by the secondary issues, as the Russell 2000, the small-cap benchmark composite, crossed into negative territory in the first hour of trading, being joined there by the Standard and Poor's Mid-Cap 400 Index. This pattern has been in place for some days now. Encouragingly, though, the selling didn't mushroom as it had done earlier in the week. And when the key indexes held their ground, the averages crossed into positive territory as the morning ran its course.
The market then stayed on the plus side of the ledger into the early afternoon, albeit never strongly so, as the equity participants awaited the release at 2:00 (EDT) of the Federal Reserve's FOMC minutes from that last gathering on June 17th and 18th. As to that issuance, the central bank intoned that it had decided to end its asset purchase program in October, although as with most policy decisions, nothing was etched in stone. As to the more critical issue of just when the bank would start to raise interest rates, the consensus was that it would come sometime in 2015.
At first, market participants frowned on the release, and stocks immediately lost a small portion of their modest gains. However, as no selling surge ensued, the market headed up again, with the best levels of the day eventually reached. The market apparently was encouraged that the central bank had not thrown investors the proverbial curve, opting, instead, to maintain a dovish stance.
Thus, by the close, stocks were strongly in the black, led forward by the Dow, which picked up a formidable 78 points, and the NASDAQ, which bounded ahead by 28 points. The gains were less compelling on the small- and mid-cap side. Among the day's winners was the aforementioned Alcoa, with this former Dow-30 component gaining more than 5% on the day. Twitter (TWTR), too, tracked higher, following a notable loss earlier in the week. Now, Wall Street will await additional profit releases over the next fortnight. Among some individual gainers on the Dow, entertainment mogul Walt Disney (DIS - Free Disney Stock Report) pushed forward nicely, establishing an all-time high in the process, as the shares pushed above $87 for the first time ever.
Meanwhile, all 10 of the major equity groups gained on the session, with particular strength being shown by the telecom stocks, the consumer cyclical equities, and the basic materials and energy issues. The utilities lagged, ending essentially flat.
Now, looking ahead to a new day, there will again be a paucity of major news items on our shores, while earnings releases will be sparse. However, that is not the case overseas, where banking woes in Portugal are sending shudders across the European markets this morning. As to trading in Asia, we saw general weakness overnight, but the real action, as suggested, is coming this morning from the Continent, where the principal bourses are tracking a sharp downward path. In fact, Europe's benchmark stock index is on track for its lowest close since early May. Not only are there concerns in Portugal, but the markets are reeling from weak industrial output figures issued by Italy and France. Finally, our futures, following up on the aforementioned weakness in Europe are plunging, with the S&P 500 Index futures now off 16 points and the NASDAQ futures lower by 36 points. - Harvey S. Katz