After The Close - Today, the stock market rebounded strongly in early pre-holiday trading, as the hard-hit tech sector reversed course after two days of major selloffs. The Dow Jones Industrial Average rose over 200 points at its peak, while the S&P 500 rose by 29 early in the session. Still, this was largely on light trading volumes. Not surprisingly, then, prices tapered off in late trading, as traders did not want to be long going into the holiday. Overall, the Dow ended essentially flat, while the other indices retained solid gains.
The overall market rally was wide, as advancers outnumbered decliners by a 3.0-to-1.0 ratio. Energy-related stocks were among the strongest performers, helped by improved prospects for oil prices. On the other hand, utilities and consumer staples issues were among the weakest sectors. This reversed the relatively strong outcomes these stocks had in the two days prior.
In the broader commodity markets, the move higher was notable, as crude oil prices rose during the day. The EIA reported a rise in oil supplies, which would normally be a negative for prices. However, it now appears that prospects for a production cut are more likely. In addition, natural gas prices were higher, thanks to a larger-than-expected inventory drawdown. Gold and silver recorded gains, while the VIX volatility index fell.
Meanwhile, economic news was somewhat lackluster, as the University of Michigan consumer sentiment index for November fell slightly to 98.3 from its October read of 98.6. In addition, durable goods orders were down 4.4% year over year, though this was largely due to a decline in demand for airplane parts. Still, these moves likely increased optimism that the Fed will slow its path of interest-rate hikes in 2019.
Looking ahead, the U.S. markets are closed for Thanksgiving Day. Too, no economic data are expected, though the futures markets will be open. In addition, Friday is a shortened trading day, as the stock markets close at 1:00 PM (EST), while the bond market finishes trading an hour later. Though the session will be limited, we expect it will be affected by early Black Friday returns, as the news will likely show the first signs of how this year’s Christmas retail season will turn out. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Hopes for a Monday-Tuesday reversal by the bulls were put on hold early yesterday morning, as further weakness in the technology space and worries about some disappointment in the retailing area combined to take the stock market down sharply at the outset of trading. At its morning nadir, the Dow Jones Industrial Average, a 396-point loser on Monday, was down by almost 600 points. The other indexes were responding in kind. As noted, further declines in the tech space and a somewhat weak earnings report from the department store chain Target (TGT) roiled the markets early.
However, after that quick descent, the bulls attempted to right the ship, and rather quickly. In fact, that initial plunge eased off in a big way, with the Dow's deficit almost cut in half as we approached the two-hour mark of the trading day. But a full-scale comeback would not take hold as the morning wound down, with the Dow's loss again topping 450 points before another, more modest, rally try ensued briefly. The NASDAQ, meanwhile, pressed ahead, paring its loss further. That was in contrast to Monday, when it had led the market lower. In all, as we reached noon in New York, the indexes were all still in the red, but off their earlier lows.
In other decisive news, the U.S. Census Bureau reported that both housing starts and building permits had rebounded in October, if gingerly, from their earlier mini-slide. Specifically, housing starts came in at 1,228,000 for last month. That was a 1.5% increase from the September level of 1,210,000 units. However, the latest figure was below the previous-year level and also well off the early 2018 advance that had starts running as high as 1,334,000 units. Also, building permits, a more forward-looking metric, rose 6.0% last month, to 1,270,000 homes.
That somewhat better news aside, the equity market continued to back and fill, all the while remaining off sharply as we passed the afternoon. The major losses in the tech space, meantime, could well threaten the already challenged global economy. As to individual issues among the blue chips, shares of Boeing (BA – Free Boeing Stock Report) were lower after the company canceled a conference call, although it had bounced back nicely from the early morning trough. All in all, as traders broke for lunch, we seemed headed for a second deep loss in as many days, with the noon Dow loss at 375 points.
A second leg down then ensued that would again carry the Dow to a loss that exceeded 550 points as we moved inside the final two hours of the session. There seemed to be little incentive to buy with the uncertainties lingering on both sides of the Atlantic and throughout much of Asia. The Dow's loss, meantime, would carry that index back below 24,500 and to within a few hundred points of the October lows. Major losses again were tallied by Apple (AAPL – Free Apple Stock Report). Another recent blue chip laggard, IBM (IBM – Free IBM Stock Report) weakened anew, as did several major retailers in addition to Target.
The declines would then intensify still more as we headed into the home stretch, with the Dow's deficit exceeding 600 points for a time during the day's final hour. The NASDAQ's decline would again carry into triple digits. The worst losses of the day then would be retraced somewhat as the session ended on some modest late-session bargain hunting. That was similar to what had transpired on Monday. But the latest rally try was more limited than the one earlier in the week. And at the close, the major averages were still off substantially, holding just incrementally above their session lows.
In all the back-to-back selloffs took the Dow down a combined 948 points. That deficit, along with the 49-point setback in the S&P 500 Index carried both indexes to cumulative losses for the year. The NASDAQ now is just nominally in the black for the year, while the Russell 2000 is a bit further in the red after yesterday's bearish action. Now, as we approach the Thanksgiving break, there was mixed action overnight in Asia and thus far better results in Europe. Also, Treasury note yields are rebounding so far this morning as are oil prices. Finally, after these two massive losses to start the week, the equity futures stateside are showing early gains in a pending session that again figures to be volatile, as we approach what we hope will be a safe and happy Thanksgiving for all. – Harvey S. Katz, CFA