After The Close - The major stock indexes started out strong today, but struggled to hold on to their gains as the session wore on before ending on an up note. At the close, the Dow Jones Industrial Average was up 59 points, the S&P was up nine, and the NADAQ tacked on five points. The S&P’s outperformance pointed to broader market strength, and that proved the case on the Big Board, with gainers topping losers by a sizable margin. On the NASDAQ, though, the number of advancing and declining issues was more evenly split.
For the week, the NADSAQ lagged notably, falling about 3%. In some ways, the tech-laden index’s selloff is being viewed as a healthy correction. A number of high-flyers, including shares of electric car maker Tesla (TSLA), social media darling Facebook (FB), and online entertainment service Netflix (NFLX) were widely seen as getting ahead of themselves. Meanwhile, the Dow mostly traded flat over the past five days and the S&P posted a slight loss.
A bit more disconcerting, though, has been the pattern of the stock market posting gains in the morning, only to sell off in the afternoon. That tendency suggests a lack of conviction of the part of investors, with short-term traders quickly taking profits. Wall Street is clearly wrestling with some uncertainties not evident in 2013’s big bull market. Those include a less accommodative Federal Reserve as the central bank winds down its major bond-buying initiative, the unsettling nature of Russia’s takeover over Crimea—with troops today reported to be massing near the Ukraine border—and the effect of harsh winter weather on the economy.
But at least Friday’s economic news brought some encouragement in the form of increased spending on the part of U.S. consumers in February. That data helped the market early on, since consumer spending makes up by far the biggest part of the economy.
As for the stock market’s various sectors, energy stocks continued to shine. Sentiment toward stocks, such as driller EOG Resources (EOG) and oilfield services giant Schlumberger (SLB), has benefited from the recent increase in tensions overseas as well as reduced inventories of natural gas.
Among individual issues, shares of BlackBerry (BBRY) fell sharply on a percentage basis after the smart phone maker posted a steep decline in revenues that raised questions about its ability to compete against the likes of Apple (AAPL) and its popular products.
Monday brings the final trading day of the first quarter, in which the market has largely been consolidating the big gains of a year earlier. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:15 PM EDT - The major U.S. equity indexes all opened to the upside at the start of today’s trading session. But, after sprinting to early gains of around 1%, they have settled back slightly at the noon hour in New York. The tech heavy NASDAQ led the pack with a gain of just under 1%, which, if it holds, would erase most of the composite’s losses from earlier in the week. It was a similar story for the Dow Jones Industrials and the broader S&P 500, which were virtually tied for a close second, each holding on to advances of around three-quarters of a percentage point.
Traders had a mixed bag of economic news to digest, but the upside was likely fueled by recent comments from China’s Premier, Li Keqiang, which indicated that the nation’s government was prepared to take any steps necessary to bolster its economy. With many U.S. corporations conducting a growing proportion of their business in that rapidly growing region, developments there are closely watched.
Other news included a report from the Commerce Department indicating that consumer income and spending were up in February. The latter was noted as rising at the fastest rate since November. However, behind the numbers we see that the increase was fueled by health care and utilities. Also, purchases of big-ticket items were down for the third month in a row, though this winter’s unusually severe weather likely played a role in that decline. Meanwhile, the University of Michigan reported its final numbers on consumer sentiment for last month. March’s reading came in at 80, down slightly from 81.6 in February, and the lowest since November.
European markets have also showed solid gains, with the major bourses all near their highs for the day as their respective trading sessions drew to a close. Germany’s DAX was in front with an increase of about one percent, while London’s FTSE and France’s CAC-40 showed gains of just under a half percentage point each. Stock prices got a good lift when the European Commission reported that a jump in consumer confidence in March boosted economic sentiment in the euro zone to its highest level since July of 2011. Economists cautioned, however, that consumer sentiment (now at a 76-month high) remained vulnerable to any escalation in the crisis in Ukraine. – Mario Ferro
At the time of this article’s writing, the author did not have positions in any companies mentioned.
Stocks to Watch from The Survey – Corporate news is rather light this morning, but there are a few earnings reports that investors should be aware of. The most high-profile release is from struggling smartphone developer BlackBerry (BBRY). The company’s February-period loss was not nearly as wide as most on Wall Street had expected, although revenues for the period missed the mark and plunged a whopping 64% from a year earlier. Regardless, investors focused on the bottom line, and BBRY stock is up nicely ahead of the bell, as a result. Athletic footwear, apparel, and accessories retailer The Finish Line (FINL) also delivered a mixed February-quarter report, but investors found enough good news to bid the equity modestly higher in pre-market trading. The same can’t be said for shares of open source software solutions provider Red Hat (RHT), which are indicating a slightly lower opening this morning 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 - The major U.S. equity indexes finished yesterday’s low-volume session in the red, but the results could have been worse. The Dow Jones Industrial Average and the broader S&P 500 Index were able to minimize the damage, with the latter index managing to stay above 1,840 mark, which has acted as a level of support in recent trading days. However, the same can’t be said for the NASDAQ, which has been under notable selling pressure for much of this week. Indeed, technology and financial stocks—particularly the banking issues yesterday—have fallen sharply, putting pressure on the tech-heavy composite (more below). Likewise, the big laggards in the Dow 30 yesterday were the technology blue chips, most notably shares of International Business Machines (IBM - Free IBM Stock Report), Cisco Systems (CSCO - Free Cisco Stock Report), and Microsoft (MSFT - Free Microsoft Stock Report).
Thus, today is set to kick off with the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index staring at a losing week. The broader S&P 500 Index and the NASDAQ are sporting week-to-date losses of around 1%, while the Dow 30 is down 0.2%. As noted, the big laggards this week have been the technology—particularly the biotechnology stocks—and financial issues. Pressuring the financial sector yesterday were the banking stocks, which traded lower after the Federal Reserve announced that a few major banks failed the lead bank’s annual stress tests. In particular, investors penalized Zions Bancorporation (ZION) and Citigroup (C), which failed the latest tests. The latter bank is prohibited from raising its dividend and buying back more stock until further notice from the Fed.
From a sector perspective, the number of up and down arrows among the top-10 groups was rather even yesterday. That said, there once again appeared to be some sector rotation taking place in a consolidating market. As noted, the technology and financial stocks are clearly out of favor this week. Conversely, energy stocks have moved higher, as oil prices on the New York Mercantile Exchange settled above the $100-a-barrel mark yesterday. Crude prices hit a three-week high on Thursday, despite a bearish industry report the prior day. Investors appear worried that the escalating tensions between Russia and Ukraine could disrupt worldwide oil supplies. The turmoil in Eastern Europe and the growing geopolitical tensions between Russia and the West have unnerved investors and prompted some “flight to safety” in recent days. To wit, we saw some rotation into the more defensive utilities, consumer staples, and telecom stocks yesterday.
Meantime, the news from the business beat was fairly supportive yesterday. Before the market opened, the Commerce Department’s final revision to the fourth-quarter GDP estimate showed that the nation expanded by 2.6% in the final period, which was up from the prior reading of 2.4%. We also learned that weekly initial unemployment claims for the week ended March 22nd fell to 311,000, its lowest level since November. Both reports were signs that the economy is continuing to strengthen. Then, just minutes ago, we learned that both personal income and spending rose by 0.3% in February, which is another sign that the consumer, which accounts for nearly two-thirds of the nation’s economic output, is feeling a bit better these days.
Looking ahead, we would not be overly surprised if volatility picked up in the two remaining trading days of the first quarter. The aforementioned concerns about Eastern Europe are one issue investors will keep an eye on, with tensions escalating over Crimea. Second, on low trading volume days, the market tends to witness some pronounced intra-day swings, which has certainly been the case over the last fortnight of trading. Lastly, the end of the quarter tends to bring some “Window Dressing” from portfolio managers, which can produce some volatility in the market. This strategy is implemented at the end of a quarter by institutions to improve the appearance of their portfolios/funds before presenting them to clients. The fund manager often will sell stocks with losses and purchases higher-growth stocks near the quarter’s end. That said…
With less than an hour to go before trading commences on these shores, the equity futures are pointing to a higher opening for the U.S. market. Overnight, Asia’s major indexes finished higher, and the major European bourses are comfortably in positive territory as trading moves into the second half on the Continent. Helping matters are the latest comments from China’s Premier Li Keqiang, which have many market pundits thinking that easing measures to aid the slowing economy are forthcoming. Turning back to the U.S., investors will be keeping a close eye on the consumer stocks, as we get a few noteworthy reports on the consumer sectors, including today’s latest consumer sentiment data from the University of Michigan (due at 10:00 A.M. EDT). - William G. Ferguson
At the time of this article's writing, the author did not have positions in any of the companies mentioned.