After The Close - Following a strong open to trading, the major U.S. indexes fell below their breakeven lines and remained there for most of Tuesday’s session. The NASDAQ 100 was the biggest laggard of the large-cap composites, losing 19 points. The broad-based S&P 500 and Dow Jones Industrial Average showed more modest pullbacks as the day progressed, with each finishing roughly even for the day. Save for the utility and noncyclical consumer goods equity groups, each of the major market sectors finished the day in negative territory. Overall, market breadth favored declining shares by a 1.5-to-1.0 ratio.
Some bright spots did exist, however. A report from yesterday afternoon linking Disney (DIS - Free Walt Disney Stock Report) with Twenty-First Century (FOXA) in acquisition talks has sent both mass media company’s shares higher. The former is said to be interested in purchasing substantially all of Fox’s studio production and programming businesses, which would bolster the House of Mouse’s content offerings as it builds a direct competitor to streaming giant Netflix (NFLX). So, the merger and acquisition pipeline is heating up once again, evidenced also by Broadcom’s (AVGO) efforts to take over rival Qualcomm (QCOM). While the latter’s shares traded higher on the speculation, Broadcom shed several percentage points on Tuesday.
Though news from the business beat is expected to be scarce through tomorrow, the final two days of the week figure to offer some updated clarity on the strength of the economy. Thursday will see updated jobless claim data, as well as monthly wholesale inventory figures for September. Meanwhile, U.S. crude oil slipped slightly from its recent highs, as tensions flare between several OPEC members (Saudi Arabia and Iran). The cautious optimism in this commodity market has relied in no small part on the continuation of the cartel’s drilling accord, which an escalation in conflict would ostensibly undermine. This threat, it bears noting, remains a distant one, with per-barrel values remaining healthy.
Despite the sluggishness that characterized the market on Tuesday, many equities and each of the major U.S. indexes continue to trade near their historic peaks. With a December rate hike largely priced into recent quotation levels, we expect the bullish undertone to persist for the foreseeable future. But one development worth monitoring is tax reform, which lawmakers are working to implement in the near term. The failure to enact this policy before the midterm election cycle heats up could lead to a broad-based selloff, if not a bona fide correction, to recent highs. Stay tuned. - Robert Harrington
At the time of this article’s writing, the author did not have any positions in the companies mentioned.
12:20 PM EST - Equities opened higher this morning, but pulled back after about an hour, and remain under pressure as we pass the noon hour in New York. Specifically, the Dow Jones Industrial Average is down 48 points; the broader S&P 500 Index is off slightly; and the NASDAQ is lower by 30 points. Market breadth is negative, as decliners are outnumbering advancers on the NYSE. Further, most of the major equity groups are in negative territory, with notable losses in the financial stocks and basic materials issues. However, the consumer non-cyclical names and utility stocks are bucking the downtrend to some degree.
Traders received little economic news this morning. Tomorrow will be a quiet day, too. However, for those investors following the commodity markets, the EIA will be posting its latest weekly crude oil inventory figures. On Thursday, the pace should pick up, as the initial jobless claims are reported, along with wholesale inventories for the month of September.
Meanwhile, third-quarter earnings season continues. Over the past 24 hours we heard from The Priceline Group (PCLN). Shares of the online travel operator are down sharply in response to a weak report. In addition, shares of Skyworks (SKWS) are off, after the technology company posted respectable results, but offered uninspiring guidance.
Technically, the stock market has been holding up quite well lately. Recently, pullbacks have been brief and the bulls have quickly moved in to support equities. - Adam Rosner
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, no stranger to record high prices, opened up trading yesterday morning with additional all-time gains, as deal making took center stage. To wit, chipmaker Broadcom (AVGO) announced it was making an offer for rival Qualcomm (QCOM). The proposed takeover, for $70 a share, was met with some doubts, as Qualcomm stock rose just grudgingly at the outset and throughout the day, while Broadcom stock moved lower at first, before ascending later on in the session.
Also, of note Intel (INTC - Free Intel Stock Report) and rival Advanced Micro Devices (AMD) announced that they would team up in some efforts. Shares of the latter surged, while Intel stock moved up more modestly. Heretofore, the two companies had more often than not been at odds in their long history. So, abetted by the former proposed linkup and the latter working accord, the market got an early lift that would continue for the majority of the morning. And as we headed toward the start of the afternoon, the market was modestly on the plus side.
Meanwhile, in addition to the deal making, Wall Street also was benefiting from strength in oil prices, as crude rushed up to its highest level since 2015. Several high-profile oil stocks benefited from this pickup in crude. Even more dramatic were the gains in the shares of some drillers, including Schlumberger (SLB). That issue would climb by some $3.50 a share on the day or about 5%. On the other hand, the consumer non-cyclical group would falter once again, with some large food processor stocks falling back sharply.
As the afternoon began, the market would stay range-bound, holding narrow advances. True, earnings releases and pending reports gave traders some cause for euphoria or concern. For the most part, however, it was the rise in oil and the interest from deal making that held the attention of traders. And that was a constructive one-two punch. Things would not change much as the afternoon wound down. Also, economic releases and Federal Reserve news, big factors last week, would be less pivotal over this five-day span.
The equity market would then continue on its somewhat higher path over the balance of the session, never veering too far one way or the other. As before, the NASDAQ, which ultimately would close up 22 points on the day, would lead the way higher, while the S&P 500 would edge up by three points. The Dow Jones Industrial Average, ahead just nine points at the end of trading, would lag somewhat. All told, six of the 10 leading groups would end higher, while gaining stocks would hold onto a 17-to-12 edge on losing issues on the Big Board.
Looking out to a new day now, we see that stocks were sharply higher in Asia overnight, on optimism about oil prices, while in Europe, the leading bourses are currently heading a bit lower. Elsewhere, the aforementioned oil prices, up sharply yesterday, are holding steady this morning, with West Texas crude still priced above $57 a barrel; Treasury note yields are edging up a little; and the U.S. equity futures are heading irregularly higher, at this hour. - Harvey S. Katz, CFA