After The Close - Equities moved briefly higher this morning, sold off sharply in the afternoon, tried several times stage a recovery, but were unable to turn the tide. At the close of trading, the major averages were all firmly in negative territory, with the Dow Jones Industrial Average down 546 points; the broader S&P 500 Index off 57 points; and the technology-heavy NASDAQ lower by 93 points. Market breadth was negative, with decliners ahead of advancers by a margin of about 3 to 1 on the NYSE. All of the major market sectors lost ground today, with pronounced declines in the energy and financial stocks. The technology and basic materials issues managed to show some relative strength, for some time, but still closed lower.
In economic news, the Consumer Price Index (CPI) rose 0.1% during the month of September; a larger increase had been expected. Today’s report may have helped diminish investors’ fears that inflation could soon become a major challenge. Elsewhere, initial jobless claims for the week of October 6th, rose to 214,000, where analysts had predicted a better showing. Tomorrow, we will get a look at the latest monthly import and export prices, as well as the University of Michigan’s preliminary consumer sentiment figure for the month of October.
In the corporate arena, we heard from Dow-component Walgreens Boots Alliance (WBA – Free Walgreens Boots Stock Report). The drug-store operator posted respectable results, but the stock moved lower. Meanwhile, the third-quarter earnings season gets officially under way tomorrow, with several major banks weighing in with their numbers. The list includes, JPMorgan Chase (JPM – Free JPMorgan Stock Report), Wells Fargo (WFC), Citigroup (C), and PNC Financial (PNC). Assuming these reports are encouraging, investor sentiment may pick up, somewhat.
Technically, the stock market sold off over the past couple of days, erasing much of the progress made in 2018. It remains to be seen when the bulls and bargain hunters will regroup and re-enter the market. – 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 - The Dow Jones Industrial Average, on the doorstep of 27,000 just days earlier, abruptly fell below 26,000 yesterday afternoon in a blaze of selling engendered by rising Treasury note and bond yields. Specifically, after days of moderate profit taking, on those rate shifts, but no wholesale unloading of equities, the situation changed yesterday. Perhaps it was the report earlier in the day that core producer (or wholesale) price inflation had jumped by 0.4% in September--the largest one-month increase since January--that set off the alarms. Or it might have been the further rise in note yields, to 3.23%, on the 10-year Treasury, that did it.
Whatever the case, the equity market, which had been falling steadily for days, but generally in some moderation, really took it on the chin yesterday afternoon. Specifically, the Dow off all morning and into the early afternoon, with declines of 300 points, or so, nearly doubled that drop after 2:00 PM (EDT) and plunged further, thereafter. In all, that composite would push to an afternoon decline of more than 3%. Worse still was the NASDAQ, which shed more than 200 points, or about 3.5% in that late swoon. Most groups were affected, although the food processors, under pressure throughout the year, managed to avoid the worst declines.
But the most severe setbacks were suffered by the technology stocks on fears about trade and valuations. The S&P 500, meantime, fell for a fifth day in succession, for the first time since late 2016. That index declined to below its 50-day moving average in the process. For the month to date, the tech-laden NASDAQ has shed more than 7%. As to rates, the Treasury is now at its highest level since 2011. In addition to rate fears, there also are concerns about tariffs and trade with China. At this time, there appears to be no end in sight for that worsening global standoff.
As to recent economic news, while the business expansion continues to roll along, with last week's data on manufacturing activity, the non-manufacturing sector, employment, and unemployment all making for generally good reading, the latest data on the Producer Price Index provided food for thought. Here, the headline inflation increase of 0.2% was not worrisome, but the core figure--that is excluding the volatile food and energy components--which showed a gain of 0.4%, was an issue, as it was the largest increase in that category since last January.
Meantime, the downturn continued into and through the final hour, with the Dow's loss surpassing 800 points as the close neared, with the other indexes tumbling in kind. Breaking things down, all 10 of the major equity sectors fell, with declines of greater than 2% in the materials, consumer cyclical, energy, financial, industrials, and technology sectors. Only the telecom and utility areas, with nominal setbacks, escaped the market's full wrath. All told, losing stocks overwhelmed gaining issues by some seven-to-one on the Big Board, There was simply no place for the bears to hide on this warm early autumn day in New York.
Looking out to a new day now, and following the massive selloff in New York, we see that stocks in Asia were off sharply in overnight dealings, while in Europe, the leading bourses are now tumbling. Also, oil prices are down notably so far this morning; Treasury note yields, which edged up to 3.23% yesterday, are at 3.17% this morning. And after all the red ink yesterday, the U.S. equity futures are showing early steep losses. Finally, after yesterday's dramatic action, we would not be surprised to see the equity market to again show elevated levels of volatility throughout the session. Stay tuned. – Harvey S. Katz, CFA