AfterTheClose - Equities moved sharply lower this morning, but managed to recover some ground in the afternoon. Today’s weakness was partially attributed to mounting concerns about a rising interest-rate climate. Of note, the yield on the 10-year Treasury is currently near the 3.20% mark. At the end of the session, the Dow Jones Industrial Average was down 201 points; the broader S&P 500 Index was off 24 points; and the NASDAQ was lower by 146 points. Market breadth was negative today, with losers well ahead of winners on the NYSE. From a sector perspective, the technology and healthcare issues lost ground, while the utility names displayed some relative strength.
Traders received a couple of news items this morning. Specifically, factory orders increased 2.3% during the month of August, which was a solid reading. In addition, initial jobless claims dipped to 207,000 for the week of September 29th, which more or less matched expectations. Tomorrow morning, the government will release the September employment report. This issuance will likely be followed closely by investors, as they speculate about the Federal Reserve’s next move.
In corporate news, shares of Constellation Brands (STZ) advanced after the beverage manufacturer delivered a solid report and provided an upbeat outlook. Elsewhere, shares of Barnes & Noble (BKS) moved sharply higher on reports on that the bookstore operator would be looking into strategic alternatives, which could include M&A activity.
Technically, the stock market encountered some selling pressure today, as traders took note of rising bond yields. While higher interest rates may present some challenges for the equity markets, this should partially be offset by a strong economy and vibrant corporate sector. Looking ahead, the third-quarter earnings season will soon commence and that may well provide a better sense of direction for investors. - 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 stock market continues to draw strength from the economy’s performance, the likelihood of upbeat corporate earnings ahead, as well as a partial easing of trade tensions.
Investors received more favorable business news early in the trading day on Wednesday when the Institute for Supply Management (ISM) reported that its nonmanufacturing index rose to the highest level since 2008.
Nonmanufacturing, considered to be the services sector, represents about 80% of the domestic economy. The announcement built on recent data indicating very solid underlying business trends.
In turn, the good news on the economy is expected to help companies turn in nicely higher quarterly profits for the June to September period, with earnings season set to get going in earnest in a week or two. Investors are also relieved that trade relations between the United States, Mexico, and Canada have been firmed up by a proposed agreement.
At yesterday’s closing bell, the Dow Jones Industrial Average rose 54 points; the NASDAQ gained 26 points; and the S&P 500 added a couple of points. Stocks had been higher for much of the day.
Meanwhile, the yield on the benchmark 10-year Treasury note climbed to a new high for the year, helped by the strong showing by the ISM data.
Wall Street seems to have few misgivings these days with stocks near record highs. But there are some potentially worrisome issues that could cause trouble down the road in certain sectors. Higher mortgage rates have already hurt sentiment toward homebuilding stocks. Rising energy costs could dampen consumer spending, too, although we are not at that point yet with the national average price of a gallon of gasoline still under $3.00.
In the oil market, domestic oil prices rose by more than $1.00 a barrel in New York trading, to around $76.40, despite a larger-than-expected increase in inventories, as reported by the Energy Department. Crude oil prices have been rising in recent weeks as investors have grown concerned about tight supplies as sanctions on purchasing oil from Iran take full effect by November.
As for today, the economic calendar is light, save for an expected mid-morning reading on August factory orders. On Friday, the government’s monthly employment is due out before the opening bell. A gain of 185,000 jobs for September is expected. Thursday’s trading could be subdued ahead of the jobs report. - Robert Mitkowski