After The Close - Equities got off to a weak start this morning, partially recovered in the early afternoon, before pulling back even more sharply in final hours of the day. At the end of the trading, the major averages settled near the session lows, with Dow Jones Industrial Average down 158 points, the S&P 500 Index off nearly 23 points, and the NASDAQ lower by 61 points. Market breadth showed widespread weakness, as declining issues vastly outnumbered advancers on the NYSE. From a sector perspective, the healthcare and consumer names fell considerably. Meanwhile, the utility issues and basic materials stocks, although lower, displayed a degree of relative strength.
Meanwhile, traders are likely concentrating on the nation’s employment situation. Specifically, according to Automatic Data Processing (ADP), 158,000 private payrolls were added to the nation’s economy in the month of June. This figure fell well short of analyst expectations. In addition, initial jobless claims rose to 248,000 during the week of July 1st, where analysts had been looking for a better result. A clearer picture will emerge tomorrow morning when the government delivers the non-farm 0payroll figures for the month of June. Expectations are calling for the addition of about 180,000 jobs, which may be a bit optimistic given the results seen today.
Elsewhere, few companies posted their quarterly reports. However, shares of Herman Miller (MLHR) moved up nicely in response to a well-received report. In M&A news, shares of HSN, Inc. (HSNI) surged on reports that Liberty Interactive (QVCA), owner of QVC, will purchase the company in an all-stock transaction.
Technically, the stock market has pulled back in recent weeks. Apart from tomorrow’s employment report, the next catalyst that could meaningfully move the stock market, one way or the other, will be the second-quarter reporting season, which will soon be starting up. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:20 PM EDT - The major indexes all moved lower on Thursday morning, continuing the streak of selling that characterized much of Wednesday’s market and offset a strong Monday session before the July 4th holiday. The Dow Jones Industrial Average shed as many as 140 points before noon, while the S&P 500 and NASDAQ were unable to mount any sustained rally. There are many factors playing into the recent downturn, from monetary policy to economic updates. But we think the primary cause for the nearly 3-to-1 edge held by declining shares today has been investors cashing in on the elevated valuations seen across the board.
Still, profit taking was not the only component lending itself to the selling. Struggles in the tech sector can be blamed for much of the Dow and, of course, the NASDAQ’s weakness. Technology has been among the better performing categories since November’s election, which also saw the basic materials, industrials, and financial sectors rally to never-before-seen highs. The concern that the industry is too highly valued has contributed to a 4% slip in the past month. While averages remain well above where they were a year ago, the pressure indicates that investors are clamoring for some positivity – perhaps in the form of quarterly earnings, due later this month – to reignite the enthusiasm around the industry. At noon, nine out of ten market sectors were in negative territory.
On the business beat, the Institute of Supply Management’s survey of non-manufacturing activity for the month of June came in higher than expected (57.4). This was a better result than yesterday’s manufacturing update, which revealed a 0.8% fall in factory orders. Tomorrow, the Labor Department’s job growth report is also likely to move the needle, as traders reassess their positions to end the holiday-shortened week. Today’s report from Automatic Data Processing (ADP), often thought of as a harbinger for the government release, showed the private sector added only 153,000 jobs in June, notably below the 185,000 estimate.
Looking out, we see that each of the three major large-cap indexes had pared their losses as we crossed into the afternoon. We suspect the bulls will continue to push toward the breakeven line by the closing bell. Yet, with few catalysts for a turnaround in sentiment on tap, we are not holding out much hope for a sudden broad-based rally to occur during the second half of today’s session. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell - The U.S. stock market, after a generally stronger pre-holiday shortened session on Monday, entered the post-July 4th trading arena with some clear misgivings, as stocks wilted at the start of the day's action. In all, the Dow Jones Industrial Average, a 130-point winner to start the week, quickly fell back and did so rather sharply. However, that setback proved short-lived, to an extent. Indeed, while the 30-stock blue-chip composite could not come all the way back during the morning, much of that early pullback was erased as the noon hour arrived in New York.
The early selling, which did not amount to all that much in the major averages, as the recently weaker NASDAQ, a technology-sector casualty in late June, stayed largely in the black, ending the morning's action with a 20-point, or so, advance. Overall, the indexes alternated between gains and losses early in the day, as nervous traders awaited the 2:00 PM (EDT) release of the minutes from the Federal Reserve's last meeting. The Street was looking for clues as to when the central bank will start unwinding its balance sheet and vote to next raise short-term interest rates. Our sense is that the bank will vote for just one more hike this year.
Meanwhile, in economic news, and one session after the Institute for Supply Management reported a surge in manufacturing in June, we see that factory orders fell by 0.8% in May. That was a larger setback than forecast. Tomorrow, the ISM will issue its companion report on non-manufacturing. A slightly lesser rate of gain is forecast for the June survey than was the case in May. Also of note, car sales were weak again last month; data on that count were released on Monday. Further, the Labor Department will issue its latest job growth figures on Friday morning. Expectations are for a gain of 177,000 positions.
This last item can be a stock market mover, as expectations for future Fed policy are often predicated to a degree by results on that front. In the meantime, the market rolled into the lunch hour in mixed-to-lower fashion, with nearly all of the 10 major groups in the red, led down by a 1.5% plunge in the energy group, on a retracement in oil on global output fears. Bucking the trend was a strong gain in the recently weak technology group. Overall, losing stocks held a formidable edge on gaining issues, to the tune of some five-to-two on the Big Board.
The stock market then moved in a sideways direction into the early and mid-afternoon, as the Fed minutes did rather little to rattle investors, with the Dow moving sideways around the neutral line for the balance of the session, with oil and the latest threats from North Korea occupying the minds of some traders, but not to the degree that would materially affect market action. Overall, the major bias was to the downside, although there were some selective attempts to right the ship late in the day.
Such attempts could not succeed in the end, though, so the day's action wound up notably to the downside, with losing issues retaining a solid five-to-three lead gaining stocks. Also, at the close, the energy group was the big loser, while technology was the lone advancing group of some note. All told, the Dow ended flat; the S&P 500 climbed slightly; and the NASDAQ gained strongly, rising 41 points. At the same time, the small-cap Russell 2000 dropped nearly seven points.
Looking out to a new day now, we see that stocks were lower in Asia overnight, while on the Continent, the key bourses are trading down, as well at this hour. Also, gold is steady in early U.S. dealings; oil is up modestly after a big drop yesterday; and Treasury yields a touch higher. Also, the U.S. futures are trending down at this hour. - Harvey S. Katz