After The Close - Stocks got off to a weak start in the morning, and were unable to stage a meaningful recovery in the afternoon. At the end of trading, the major averages were stuck in negative territory. The Dow Jones Industrial Average was down 30 points; the broader S&P 500 Index was off six points; and the NASDAQ was lower by almost 20 points. Market breadth showed a negative bias to the session, with losers outpacing winners on the NYSE. Essentially, all of the major stock sectors lost ground. There was notable weakness in the energy and basic materials issues, accompanied by falling crude oil prices. Meanwhile, the defensive utility stocks managed to post an advance, as traders looked for safety.
The economic news was light today. However, the Producer Price Index (PPI) rose 0.4% during the month of October, showing a greater-than-anticipated increase. The core reading, which excludes food and energy, noted a similar advance. While some on Wall Street watching interest rates may not be overly pleased, somewhat higher prices should accompany a strong economy. Tomorrow, the Consumer Price index (CPI) is scheduled to be released. The latest monthly retail sales figures and business inventories will also be reported.
Elsewhere, in the corporate arena, a few widely-followed companies posted their numbers. Specifically, shares of Home Depot (HD – Free Home Depot Stock Report) advanced on a solid report. Things did not go as well for The TJX Companies (TJX). That stock encountered selling, as some investors had concerns about the retailer’s top line. In M&A news, shares of Buffalo Wild Wings (BWLD) surged on reports of an acquisition offer.
Technically, the stock market took a breather today. With the third-quarter earnings season now essentially over, traders may be concerned that the Administration’s tax reform effort could encounter some resistance. - 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 EST - U.S. equity markets began the day on a down note and, although rebounding from their early morning lows, they had failed to make any real progress by noon time.
Financial news has been thin today, but seemingly favorable on the whole. The Labor Department reported a 0.4% increase in the Producer Price Index for October. The uptick lifted the 12-month rate to 2.8%, which is the high-water mark since February 2012. This would at least suggest that the Federal Reserve would not need to be overly aggressive with rate increases, which is good news for stock investors. However, it appears that prevailing uncertainty over the timing and extent of any tax reform package continues to weigh heavily on the market. On point, the prospect of a reduction in U.S. corporate tax rates has been one of the pillars supporting the market’s gains this year.
In all, the Dow is down 50 points; the S&P 500 is off by six; and the NASDAQ is lower by 18 points. Drilling down a little further, nearly all of the 10 key equity groups are in the red, with Energy and basic materials issues each down more than a percentage point. Unsurprisingly, utilities have been the most resilient sector, rising about half a percent. Elsewhere, oil prices were down sharply after the International Energy Agency pared back its outlook for global demand in 2018 by 100,000 barrels a day, to 98.9 million barrels (up 1.3% from its estimate for this year). The agency also projected that rising shale output would result in the U.S. becoming a net exporter of oil by the latter part of the next decade. Altogether light sweet crude is trading around $55.50 a barrel, down 2.2%.
Turning to the European bourses, we find that a negative mood prevailed there as well. The key indexes all started the day’s session in the green, likely due to a favorable third-quarter GDP report for the region. However, trader sentiment took a turn around midday and only got worse as the day wore on. As the closing bell approached, the U.K.’s FTSE 100 was faring the best of the lot, having recovered to just below break-even. However, Germany’s DAX and France’s CAC-40 were each sustaining losses of about half a percent for the day. - Mario Ferro
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 began the second full trading week of November to the downside, burdened with the pre-opening news that long-term Dow Jones Industrial Average component General Electric (GE - Free General Electric Stock Report) voted to halve its quarterly dividend to $0.12 a share. Interestingly, GE stock then indicated a higher open in the pre-market, although once live trading did begin, the issue headed notably lower. Overall, this news and worries about possible difficulties in getting a tax reform package passed in a timely manner combined to take the early measure of the bulls.
All told, the Dow, led by a several percentage point drop in the shares of GE, fell almost 80 points in early trading. However, when the slide in that stock did not precipitate a wholesale pullback in the equity market, the averages did an about face, and as we neared the one-hour mark of trading, the three large-cap indexes had briefly turned positive. But that comeback would prove short-lived, and worries on the political front, in particular regarding the tax drama, again pushed stocks lower, but much more gingerly this time.
So, as we headed into second hour of trading, the market, while lower, was really going nowhere. In all, half the major equity groups were lower, while losing issues held just an eight-to-five plurality. Also, with little in the way of economic news of note set for release yesterday and with earnings releases dwindling in number as we moved more deeply into November, the focus was clearly on Washington, where in addition to worries about the ongoing tax reform effort, there are concerns that even if a bill is passed, it might be less than idyllic.
As such, stocks continued to drift as the morning drew to a close. Still, there was little direction, overall. One stock that clearly was not participating in any attempted mid-session comeback was the aforementioned conglomerate GE, which was off 7% in early afternoon dealings. Also lower were shares of Johnson Controls (JCI), which on a technical basis, had breached its 50-day moving average. That issue was off about 1.5%. In all, as we moved into the afternoon, the market had a mixed vibe to it, as investors awaited the latest news from Washington.
The market finally did start to improve as the afternoon progressed, with the three large-cap composites edging into the black and would remain there for the balance of the afternoon. It would seem that the market is in a holding pattern, looking for a new catalyst to drive prices yet higher. In recent weeks, it has been earnings. But reporting season is fast winding down, and with tax reform still on the drawing board and the economy providing few upward surprises, there is little new to drive prices. So, stocks have been meandering about.
Meantime, the market, as noted, did little of note during the balance of the afternoon, finishing with small overall gains in the large-cap sector. In all, the Dow rose 17 points; the S&P 500 added three points; and the NASDAQ inched up by seven points, while the small-cap Russell 2000, in the red for much of the session, eased just nominally. Breaking things down further, just half of the 10 leading equity groups posted gains, while on the Big Board, losing issues held a moderate edge on winning stocks.
Looking out to a new day, we see that the major indexes over in Asia were lower in overnight trading, while in Europe, the bourses are tracking downward, as well. Meanwhile, Treasury yields, flat yesterday, are now off a bit, while our futures are suggesting a somewhat weaker open, when live trading resumes at 9:30 AM (EST) this morning. - Harvey S. Katz, CFA