After The Close - The stock market traded notably lower this morning, but managed to recover to some extent in the afternoon. At the close of the session, the Dow Jones Industrial Average was down 44 points; the broader S&P 500 Index was off eight points; and the NASDAQ was lower by 19 points. Market breadth was quite negative today, as losers outpaced winners by a solid margin on the NYSE. Further, most of the major market sectors showed losses, with considerable weakness in the energy group. It is worth mentioning, that the price of crude oil retreated today to just under $48 a barrel in New York. As this key commodity is now back below $50 a barrel, some traders may be concerned that further gains in the energy patch may be limited. Here, it will likely be crucial that key producing nations keep output at reasonable levels. In contrast, some of the consumer issues displayed a degree of relative strength today.
There was one economic report released this morning that is worth touching upon. Specifically, the Producer Price Index (PPI) showed a 0.3% increase for the month of February, advancing a bit more than had been anticipated. Tomorrow we will get a look at another inflation-related report, as the Consumer Price Index is slated to be released. While several other reports are also due out tomorrow, the main event will take place in the afternoon, when the FOMC concludes it two-day meeting and weighs in with an interest-rate decision. Given the strong economy and vibrant labor market, it is likely that the Federal Reserve will choose to implement another small hike. As rising rates are not generally well received on Wall Street, it is critical that the economy and corporate sector continue to show progress in the months ahead.
Meanwhile, it was a light day for corporate profit news. However, the first quarter of 2017 will be coming to a close at the end of the month, and that may bring some guidance revisions or pre-announcements in the weeks ahead.
Technically, equities have moved nicely higher over the past several months. So, the consolidation that has taken place in early March does not come as a surprise. However, it remains to be seen if the bulls can stay in control of the market going forward. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
11:50 AM EDT - Stocks started the second session of the week rather decisively to the downside in the wake of weaker showings overseas and as the Federal Reserve's FOMC meeting got under way. That two-day get-together is almost certain to end tomorrow afternoon with the bank voting for its third interest-rate rise since the long business expansion has been in place. That presumptive rate hike is also expected to be the first of three increases this year. Any hikes above that number, which we see as unlikely, could set off alarm bells on Wall Street.
Meanwhile, as noted, stocks started off the current session to the downside, with the Dow Jones Industrial Average falling some 50 points within the first hour of trading. Unlike yesterday, however, when the NASDAQ was gaining, even as the Dow was falling, the NASDAQ was off rather sharply today, pulling back some 30 points in the initial hour. The S&P 500 Index also was notably lower, while the Russell 2000, up nicely yesterday, was off a percentage point at that time.
Things only went from bad to worse as the morning progressed. The worries were suddenly manifold. On point, there are the logical concerns about the Fed, although, as noted, we expect no surprises when the bank ends its meeting tomorrow. Also on the minds of traders is oil, which this morning fell below $48 a barrel in New York, to a three-month low on suddenly bloated inventories. Worse, the earlier optimism in Washington is fast fading on the backs of the contentious negotiations over health care law modifications.
Breaking the weak performance down, we see that all 10 of the major equity sectors were lower in the mid-to-late morning, with the biggest casualties coming in the energy and basic materials categories on those weaker oil quotations. As to the overall market, unlike yesterday when gaining stocks held a nice lead over declining issues, today's scorecard is tilted dramatically to the downside, with losing stocks on the Big Board holding a four-to-one advantage on advancing stocks.
As we neared the lunch hour on the East Coast, the losses ebbed somewhat, with the Dow's deficit easing from some 80 points to about 30 points, while the NASDAQ's loss which had swelled to past 40 points, fell to about 30 points. As before, the biggest loser among the key indexes was the Russell 2000, with that small-cap benchmark's deficit still about one percent. As noted, the Fed and oil were just two concerns. A bigger worry we sense may be the fractious tone in Washington, where the latest news is the intra-party squabbles among the Republicans.
In sum, it is not pretty as the noon hour approaches in snowy New York, with the market's losses still rather appreciable, only a little less than they were a half hour ago. Overall, we think the bears likely will hold the edge over the rest of the session. Stay tuned. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Wall Street started out the third week of March and ahead of a looming late-winter blizzard and snow storm in the Northeast, and the long-anticipated Federal Reserve FOMC meeting selectively to the downside yesterday. As before, the major item of note was the FOMC meeting. That gathering is to begin early this morning and conclude tomorrow afternoon at 2:00 PM (EDT). At that time, the lead bank is widely expected to announce its third interest rate increase thus far in this business expansion. The latest odds of a rate hike remain better than 85%.
In addition to the Fed, investors have been looking at oil, which has given back about 10% recently, at upcoming elections in Europe, where populism has been gaining an ever-greater toehold, and at Treasury note and bond yields, which have been climbing ahead of the Fed meeting. Given all of this, and with some recognition that the stock market is rather extended, it is not all that surprising that equities have seen profit taking. In all, the Russell 2000 is off about 5%, while the other indexes are just slightly weaker so far.
As to yesterday morning's activity, the sellers were just selectively active following last week's modest pullback. By mid-morning, the Dow, off nominally earlier, had surrendered about 50 points, while the NASDAQ, which has been less of a casualty lately, was holding onto modest gains. The recently weak Russell 2000, also was stronger, in a reversal of form, while the NYSE featured more stocks gaining in price than losing ground. So, it was an uneven, but weakening, showing, as we headed into the noon hour in New York.
Things then did not change much as the afternoon began, with the Dow continuing to show modest losses, while the NASDAQ remained moderately in the plus column. This divided market then persisted throughout the afternoon as nearly all attempts to sell off the market were met with fresh buying. It seems that Wall Street is resigned to the Fed raising rates tomorrow and then twice more this year. The problem, we sense, would be if the central bank was to opt for more than three increases in 2017 or if its language tomorrow is overly aggressive.
As the day wound down, things changed little, with the Dow continuing a little below breakeven, while the S&P 500 Index stayed little changed, and the NASDAQ continued a bit higher, but never strongly so. Breaking things down further, we see that gaining stocks led declining issues on the Big Board by about three to two, which was a bit less than the midday advance of some two to one. Meanwhile, eight of the ten leading equity groups ended higher on the day, led by a solid gain in the basic materials. Most other changes were minimal.
Looking out at a new day and as we prepare for the Fed meeting about to get under way, we see that stocks in Asia were mixed overnight, while equities are showing early losses in Europe this morning. As to our markets, the early read on the futures is lower, as bond yields climb. In sum, we would expect little in the way of a statement by either the bulls or the bears today, but we could see late movement tomorrow. The risk is the Fed takes a hawkish stance in its accompanying monetary statement, which we now sense is unlikely. Stay tuned. - Harvey S. Katz