After the Close - The U.S. stock market put in another choppy session today. At the close of trading, the Dow Jones Industrial Average was up 118 points; the broader S&P 500 Index advanced 10 points; but the NASDAQ, which was quite weak, slipped 13 points. Market breadth showed a slightly positive bias to the session, as rising issues beat out decliners by a decent margin on the NYSE. It should be noted that the figures were less encouraging on the NASDAQ. Meanwhile, many market sectors managed to make progress. There was notable strength in the utilities, a defensive group that has been displaying leadership over the past few months. Select consumer names also performed well. Further, the energy stocks advanced, helped by stronger crude oil prices. But, there were losses in the technology space. The healthcare issues, too, were a bit sluggish.
Technically, stocks have been quite directionless lately. While the S&P 500 Index and the Dow Jones Industrial Average have managed to hold their ground, the NASDAQ has been struggling. This divergence has been disturbing to many traders, as they tend to favor the fast-moving growth and technology names. Notably, the NASDAQ is now just above the 4,050 mark; a break below 4,000 might be of some “psychological” importance.
There was little economic news released this morning. However, productivity slipped 1.7% in the first quarter. Analysts had been anticipating a slightly better showing. Also, Fed Chair Janet Yellen spoke before the Joint Economic Committee today. But, her remarks were largely as expected. Tomorrow, we get a look at the employment situation, with the release of the weekly initial and continuing jobless claims.
Traders are still receiving numerous corporate earnings reports. Recently, Whole Foods (WFM) posted weaker-than-anticipated results, and that issue plunged in price, as a result. Meanwhile, things went better for Disney (DIS - Free Disney Stock Report). Although that stock dipped slightly today, even though the media giant issued a strong report. After the closing bell today, we will hear from a few high-profile names, as Tesla (TSLA) and Keurig Green Mountain (GMCR) are slated to put out results. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:15 PM EDT - The U.S. equity indexes, on the heels of yesterday’s broad setback, started the session to the upside, but were not able to hold those gains for long. Since then what we have seen is a tale of two sectors, as the large-cap stocks are faring quite well, whereas their small and mid-cap brethren are struggling. Investors have had a lot to digest today, including the fluid situation in Eastern Europe, the latest commentary from Federal Reserve Chair Janet Yellen, and another round of mixed earnings news. A look at the major averages at the midday hour on the East Coast clearly reveals less of an appetite for risk among investors. The tech-heavy NASDAQ and the small-cap Russell 2000 are lower, while the large-cap dominated Dow Jones Industrial Average and the broader S&P 500 Index are in positive territory, with the former now surging by close to 100 points. Not surprisingly, the spread between advancing and declining issues is more pronounced in favor of the latter on the NASDAQ.
From a sector perspective, we are once again seeing a good deal of rotation, with funds moving out of the riskier areas and into some of the more-defensive groups, as well as the blue-chip names, which is aiding the Dow 30. The consumer staples, telecommunications, and utilities stocks are the preferred choice of investors looking for safety. There also is interest in the financial, industrial, and energy issues. Conversely, the technology, healthcare, and consumer discretionary groups are out of favor. Within the technology space, the stocks of the software and IT services companies are the biggest laggards thus far today.
The first-quarter earnings season, which is rapidly nearing the finish line, at least with regard to the industry heavyweights, has provided some interesting stories over the last 24 hours. On the positive side were reports from Walt Disney (DIS - Free Walt Disney Stock Report) and Electronic Arts (EA). Conversely, shares of Whole Foods Market (WFM) and AOL (AOL) are under significant selling pressure after the investment community was not impressed with the latest quarterly snapshots from each company. At Whole Foods, the concerns centered on another reduction in the company’s guidance, while worries about search revenues had investors heading for the exits at AOL. Meantime, the stocks of TripAdvisor (TRIP) and First Solar (FSLR) are active today following earnings results, and investors may want to keep an eye on the stock of Tesla Motors (TSLA), as the company is scheduled to report their latest quarterly results after the close of trading today; the stock is lower ahead of the report and has historically been quite volatile at times.
It has been quiet day on the economic front. However, we did learn this morning that nonfarm productivity fell 1.7% in the first quarter. It was the worst showing for that metric since the first quarter of last year. The report did not garner much of a reaction from Wall Street, as the drop in productivity was blamed on the severe winter weather that blanketed much of the nation over the first two-plus months of this year. Much like GDP, the pundits expect productivity to improve over the remainder of 2014.
Investors should also note that Federal Reserve Chair Janet Yellen is testifying in front of a Congressional Joint Economic Committee on the state of the economy. The Federal Reserve leaders’ comments, at least in recent years, can be a bit of a game changer for the equity market. A few tidbits from her prepared testimony were: the unemployment rate will continue to fall; inflation should move closer to the Fed’s target of 2% by the second half of this year, but the lead bank still foresees continuing low lending rates; and that the escalating geopolitical tensions and conflicts in Eastern Europe could negatively impact the global economy. We also think investors should keep a close eye on the next monetary moves by the Bank of England and the European Central Bank (ECB), which are meeting this week. Their monetary decisions could have a big impact on the capital markets, as well. The growing consensus is that ECB President Mario Draghi has some wiggle room with regard to further stimulus measures, but it is still unknown if the ECB will become more accommodative going forward. - William G. Ferguson
Stocks to Watch from The Survey – Earnings releases continue to flow in at a brisk pace, and video game developers are in the spotlight today, as Electronic Arts (EA) and Activision Blizzard (ATVI) both reported better-than-expected first-quarter results. Electronic Arts delivered the bigger upside surprise, and its stock is soaring ahead of the bell, in response, while ATVI shares are up moderately. Other equities indicating higher openings this morning on earnings news include media and entertainment giant Walt Disney (DIS – Free Walt Disney Stock Report), packaged foods company Mondelez International (MDLZ), which also announced a restructuring plan and a joint venture with coffee company D.E. Master Blenders, restaurant operator Potbelly (PBPB), solar panel manufacturer First Solar (FSLR), online travel site TripAdvisor (TRIP), and oil and natural gas exploration and production company Chesapeake Energy (CHK).
It was not all good news, however, and one of the biggest disappointments came from upscale grocer Whole Foods Market (WFM), which is seeing its shares plunge in the premarket, after reporting lackluster March-period financials and issuing a downbeat outlook. Shares of Internet company AOL, Inc. (AOL) are also down notably ahead of the bell 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 Monday-Tuesday reversal on Wall Street, of which we have spoken about on numerous occasions, was in force again yesterday to the consternation of the bears who started selling in the morning and never looked back. In all, they staged a wire-to-wire win, as the stock market, which had edged higher to start the week, gave it all back, and then some, closing just about at the day's low.
All told, the Dow Jones Industrial Average tumbled by 130 points; the Standard and Poor's 500 Index lost 17 points; the tech-laden NASDAQ plunged by 57 points, or 1.4%; and the small-cap Russell 2000 fell 18 points, or better than 1.6%. Meantime, losing issues swamped winning stocks, as would be expected. There were simply few places for the bulls to hide.
Behind this latest pullback, which was most pronounced in momentum plays and economically sensitive issues, were fears regarding a further deterioration in the already worsening situation in Ukraine. Spreading violence in that troubled region, which has become the focal point of an East-West Cold War standoff, has been rattling the global markets on and off for weeks, and was seemingly responsible for the latest sharp pullback in European stocks before our markets had even opened for trading.
As for economic news, the lone issuance of note was an in-line showing on the international trade front, where the nation's deficit declined smartly in March, an improvement that augurs well for an upward revision in the scant 0.1% increase in first-quarter GDP, when the government reports its updated figures for that series later this month. As to earnings, there was some news and, as before, the tidings were mixed. In other items of note, high-profile social media concern Twitter (TWTR), tumbled in trading as that recent IPO's six-month lock-up period ended, meaning that insiders could sell at will; and they did just that, forcing this erstwhile high flyers' shares to fall nearly 18%, to an all-time low of $31.72. The stock finally settled in near that nadir, closing at $31.85. Earlier in its brief history, that issue had traded at nearly $75 a share.
Looking ahead, the new session will see little of note in the way of economic data; but tomorrow that will change to some extent as we are scheduled to get weekly data on new and continuing jobless claims. The former has been up somewhat in the past couple of weeks, but expectations are that new claims will show a decline of modest proportions in the latest seven-day period.
As to earnings, they also are still coming in, with results issued after the close of trading yesterday by entertainment giant and Dow-30 component Walt Disney (DIS - Free Disney Stock Report). That blue chip reported encouraging metrics, helped by strong receipts from its hit movie Frozen, and the stock, which pushed ahead modestly in after-hours trading, retains some of those indicated gains in the pre-market this morning. Disney shares continue to trade near their all-time high. Also rallying in the pre-market this morning on upbeat earnings figures are the shares of video game maker Electronic Arts (EA). However, it is another story at upscale grocer Whole Foods Market (WFM), where a modest earnings miss is pummeling that issue in the pre-market. That stock ended yesterday at $47.95 a share; the current indications are just below $40.
Also in the day ahead, and in addition to the light economic calendar and some further earnings news--as the latest reporting period draws to a gradual conclusion--we have seen the markets across Asia take their cue from the pullback on our shores, and head notably lower overnight. However, stocks in Europe are now moving higher, suggesting some strength, after a mixed pattern earlier. And our futures, which began the day lower, have moved nicely back into the black, likely setting up a strong rebound in the early going. - Harvey S. Katz
At the time of this article's writing, the author had positions in DIS.