After The Close - The stock market got off to a wobbly start this morning; then, briefly rallied, but turned sharply lower in the afternoon. The decline came in response to comments from the President, indicating that the country would soon be implementing import tariffs on metals, such as steel and aluminum. The news sparked fears that raw materials prices could jump for many industrial and equipment companies, and spark price battles with international partners.
At the end of trading, the Dow Jones Industrial Average was down 420 points; the broader S&P 500 Index was off 36 points; and the NASDAQ was lower by 92 points. Market breadth was negative, with decliners ahead of advancers on the NYSE. Most of the major market sectors declined, with large losses in technology and healthcare stocks. In contrast, the energy and utility issues showed some relative strength.
Today’s economic reports were supportive, for the most part. Specifically, initial jobless claims moved down to 210,000 during the week of February 24th, suggesting that the labor market continues to improve. Further, the ISM Manufacturing Index moved up to 60.8 in the month of February, which was also a positive development. Elsewhere, personal income rose 0.4%, with spending advancing 0.2%, in the month of January. While these readings were tame, some on Wall Street may be concerned that inflationary pressures are building.
In the corporate arena, we continue to receive reports from many visible corporations. Of note, shares of Monster Beverage (MNST) traded sharply lower today, as investors were not too pleased with the company’s latest report. Further, shares of Kohl’s (KSS) came under pressure on concerns about the retailer’s outlook.
Technically, today the stock market pulled back sharply for the third consecutive session. The selling puts the S&P 500 Index below its 50-day moving average, located at the 2,735 level. It remains to be seen if the bulls can easily regain control of the market here, or if some further weakness will unfold in the days ahead. - 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 - This up-and-down equity market got going early yesterday with a strong early gain, as a somewhat lesser increase in the revised fourth-quarter GDP result (adjusted from 2.6% to 2.5%) eased fears of rising interest rates just a touch. To wit, the change in GDP helped reduce yields on the 10-year Treasury note from 2.90% to 2.88%; later the note fell to 2.87%. That reduction helped lift the Dow Jones Industrial Average to an early gain just north of 165 points. That gain followed a broad jump of better than 300 points on Monday and a decline of near that magnitude on Tuesday.
However, that early advance could not be sustained and the major indexes all faltered as the morning wound down, with the Dow, the S&P 500 Index, the S&P Mid-Cap 400, and the small-cap dominated Russell 2000 all going negative for a spell. The latest fears followed by one day some rather hawkish commentary by new Federal Reserve Chair Jerome Powell, who intoned that the apparent pickup inflation was raising the likelihood that the bank might need to raise short-term interest rates four times this year rather than the generally forecasted three times. The first of these rate hikes is likely to be voted for at this month's FOMC meeting.
In all, as we neared the noon hour in New York, the Dow was off by some 40 points, with only the NASDAQ still in the green, albeit grudgingly. Things then alternately got better and worse in rapid fashion, with the market generally dancing around the unchanged mark into and through the lunch hour. However, as the afternoon moved along, the bears got back in control sending the market steadily lower. In all, as we entered the final half hour of the trading session, the Dow was off by 200 points. That was the main casualty among the large caps, with the S&P 500 and the NASDAQ just gingerly in the red.
These gyrations wrapped up a turbulent month for equities, which saw a major selloff that put the Dow and the S&P 500 Index into correction territory. Yesterday's setback, which continued into the close, and was abetted by a drop in oil quotations, saw the Dow snap a 10-month winning streak its longest such skein since 1959. The key theme for the month was uncertainty about what the Federal Reserve would do with respect to interest rates. And the market does not like uncertainty. Of course, after the new Fed Chair suggested the bank might opt for as many as four rate hikes this year, that transparency was not greeted well either.
As the session wound down, there was a momentary half-hearted attempt to pare the worst losses. But that try came to naught. In fact, things got worse, with the losses ballooning to nearly 400 points in the Dow, while the other indexes faltered notably, as well. In all, the blue chip composite ended off 381 points; the S&P 500 dropped 30 points; and the NASDAQ, with late selling, closed in the red by 57 points. Losing issues easily topped winning stocks on the NYSE and the NASDAQ, while among the 10 leading equity sectors, all were in the losing column, with declines of more than 2% in the energy and basic materials groups.
Looking out to a new day and a new month, we see that the major indexes were largely in the loss column across Asia in overnight trading, while in Europe, the losses stateside are having an impact, as well, with the key bourses working lower at this hour. Elsewhere, oil, a loser yesterday, is now trending downward again and interest rates on the 10-year Treasury note, down slightly in the most recent session, are off a bit a again so far today. Finally, U.S. equity futures, after back-to-back losses to end February, are now showing early declines. – Harvey S. Katz, CFA