After The Close - Stocks declined considerably this morning and early afternoon, but managed to recover more than half its lost ground by the close. At the end of the session, the Dow Jones Industrial Average was down 101 points; the broader S&P 500 Index was off 10 points; and the NASDAQ was lower by 39 points. There was a negative bias to today’s session, as decliners easily outnumbered advancers on the NYSE. Most of the major equity groups retreated, with pronounced losses in the technology and basic materials issues. In contrast, the telecom and energy names displayed some relative strength.
There were a couple of economic news items released this morning. Specifically, initial jobless claims edged up to 239,000 during the week of November 4th. Analysts had been looking for a somewhat better showing. Elsewhere, wholesale inventories increased 0.3% in the month of September, which was in line with the consensus forecast. Tomorrow will be a light day for reports. However, the University of Michigan’s consumer sentiment survey for the month of November will be released.
Elsewhere, the third-quarter earnings season is in its final phase. Over the past 24 hours, we heard from a few names. Specifically, shares of Macy’s (M) rose sharply today, after the retail giant delivered better-than-anticipated figures. The news helped spur a rally in the broader retail sector. Elsewhere, shares of Monster Beverage (MNST) were up slightly after the beverage maker’s results more or less met expectations.
Technically, stocks remain strong, as traders seem pleased with the corporate profit outlook. Many on Wall Street are likely hoping that the Administration’s tax reform measures will be approved. However, more recently, it seems that these efforts may be running into some delays. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
11:40 AM EST - Following three uninspiring sessions to start the week, the U.S. market started the day lower and is carrying those initial losses and then some as we move closer to the midday hour on the East Coast. The lack of any fresh catalysts to push the indexes higher (it was a relatively light day on the business beat and the earnings front) and some growing sentiment that the Republican-led tax overhaul that is expected to boost economic growth and create more jobs faces will face a tough battle for passage in Congress or at the very least be delayed is hurting equities this morning.
Thus, all of the major equity indexes are in the red, with the move to the downside being led by the technology-dominated NASDAQ. Overall, declining issues are leading advancers by a wide margin on both the New York Stock Exchange and the NASDAQ, and nearly all of the 10 major equity groups are in negative territory.
From a sector perspective, the biggest laggards are the technology, basic materials, and healthcare groups. In the tech space, the stocks of the semiconductor and semiconductor equipment makers are under significant selling pressure, while the issues of the aluminum and steelmakers are out of favor in the materials sector. Conversely, we are seeing some nominally positive movement in the energy area. A modest rise in oil and gas prices is helping the energy issues this morning.
As noted above, it was not a big day for headlines in the earnings sector. (Investors should note that Dow-30 component and entertainment giant Walt Disney (DIS – Free Disney Stock Report) is scheduled to release its latest quarterly results shortly after today’s closing bell.) However, we are seeing some notable earnings-driven price movements in both directions. On the positive end, shares of Roku (ROKU) jumped after the television streaming device maker's quarterly results and guidance beat expectations, while the stocks of drugmaker Perrigo (PRGO) and cosmetics manufacturer Coty (COTY) are higher after posting their latest quarterly snapshots. Conversely, the misery continues for the retailers this morning, as shares of both Kohl's (KSS) and Macy’s (M) are down again, more so the former, after each company posted disappointing results in the latest quarter.
Meantime, it was another light day for economic news in a very quiet week for the business beat. Of note, reports showed that weekly jobless claims rose to 239,000 from 229,000 in the most recent week. Pundits were forecasting a smaller-than-expected jump, to 231,000, in the latest week.
Looking ahead to the second half of the session, the bears appear to have a nice edge, but that could change rather quickly given the fluid nature on the ongoing tax reform proposals on Capitol Hill. Investors should note that a Senate tax-cut bill, differing from one crafted by the House of Representatives, was expected to be unveiled sometime today, which may further complicate the tax overhaul push. Stay tuned. - William G. Ferguson
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell - After back-to-back uninspiring sessions to start the current week, traders began yesterday's encounter between the bulls and the bears on another sloppy note, but with more of a bias to the downside than during the prior two days. This time, though, it was the Dow Jones Industrial Average, rather than the NASDAQ, that led the way lower. Overall, it was the banking group that hurt equities during the morning hours, while the consumer non-cyclical group, a big winner on Tuesday, led the bullish cause, in particular, the large packaged food companies. They pressed forward for a second day in succession.
In all, as we moved further into the morning, the Dow held to a loss of some 20 to 40 points. As to the financials, the banks felt pressure from a flattening yield curve, with the differential between short and long duration notes and bonds narrowing materially in recent weeks. That is often the sign of a slowing economy. Should the yield begin to invert, that could be foreshadowing a recession down the road. It should be noted, however, that recent economic reports detail a modestly strengthening economy. But even the suggestion of trouble up ahead can send the bank stocks into reverse.
Then, of course, there is earnings season to consider. Here, most of the high-profile large-cap names already have reported. It is now the turn for the smaller enterprises to issue their metrics. And for these companies, the consequent up-and-down moves in response to bottom-line surprises can be dramatic, with 20% or 30% price moves becoming somewhat commonplace. Through it all, however, there continues to be rather low volatility. On the whole, earnings season has been a most constructive one, with some three-quarters of the companies already reporting surpassing expectations.
The market then steadied and began to recover as the afternoon moved along, and as we moved inside the final two hours of trading, the three major large-cap indexes had moved onto the plus side of the ledger, with the NASDAQ leading the way forward. Breaking things down at that point, about half of the 10 main equity groups were in positive territory, led as before by the consumer non-cyclical stocks. Also, winning stocks had just about caught up with losing issues on the Big Board although they continued to trail on the NASDAQ, in spite of the better showing by the index, itself.
Things changed relatively little down the stretch, as the NASDAQ, the S&P 500, the S&P Mid-Cap 400, and the small-cap Russell 2000 remained in the plus column, albeit modestly, overall, throughout the afternoon. Meanwhile, the Dow, off modestly for the final hour, or so, edged into positive territory in the final minutes, as did a narrow majority of the stocks on the Big Board, while on the NASDAQ, there was a more or less even split. Also, in the end, most of the core equity sectors turned positive, as well, following earlier weakness. So, in the end, it was a third straight essentially mixed session.
Now, a new day beckons, and as we look at the global markets, we see that shares in Asia were mixed in overnight dealings; in Europe, meantime, the principal bourses are now tracking lower. Elsewhere, oil is ahead nominally, after some slippage yesterday; Treasury yields, up yesterday, are now ahead just slightly more; and U.S. futures, following the three straight middling sessions, are showing early losses ahead of some retailer earnings. As to the calendar, it is light again today, with some key reports due for release next week, when earnings season will be largely completed, save for the retailers, which now are kicking into gear. - Harvey S. Katz