After The Close - The stock market traded considerably lower this morning, but partially recovered in the afternoon. At the close of the session, the Dow Jones Industrial Average was down 180 points; the broader S&P 500 Index was off 16 points; and the technology-heavy NASDAQ was lower by 91 points. Market breadth was clearly unfavorable today, with decliners well ahead of advancers on the NYSE. Most of the major stock market sectors took a step back, with pronounced weakness in technology and basic materials issues. In contrast, the defensive utility stocks managed to advance, as traders looked for safe havens.

Traders received an important economic release before the market opened today. Specifically, non-farm payrolls rose by 134,000 during the month of September. While analysts had been looking for a slightly better number, disruptions caused by adverse weather conditions (such as Hurricane Florence) likely played a role. Meanwhile, the headline unemployment rate moved down to 3.7%, which was a better reading than had been anticipated. In general, the September employment report was strong enough to fuel concerns that additional interest-rate hikes may be in store, and this likely put a damper on market sentiment today.

In corporate news, it was a light day for earnings announcements. However, we did hear from Costco (COST). Specifically, shares of the retail giant retreated in response to a mixed release. The pace will of reports will certainly intensify in the weeks ahead, as the third-quarter earnings season gets underway.

Technically, the stock market has softened a bit over the past few days. Traders remain impressed with nation’s strong economy and expanding corporate sector, but they may be moving with some caution, given the current interest-rate outlook. – 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 - It has been a wild week on Wall Street for those long equities—and that may well continue today with the release of the September jobs report. The bulls started the week on a roaring note, as a trade agreement late Sunday night between the United States, Mexico, and Canada drove the major equity averages sharply higher on Monday. The buying momentum continued on Tuesday, pushing the indexes to or near all-time highs. However, those good tidings evaporated yesterday, with the indexes backtracking notably on concerns about the spike in bond yields.

The rise in fixed-income yields, to multiyear highs, was bad news for equities competing for capital. The spike was a reaction to another strong round of economic data, which included stout reports on manufacturing and nonmanufacturing activity, strong manufacturing orders, and notable growth in private sector jobs. But the biggest headline may have been the unexpected sharp drop in initial weekly unemployment claims. The Department of Labor reported that initial unemployment insurance claims for the week ended September 29th fell to 207,000, which marked a 49-year low for the metric. It was further proof of tightening labor market conditions, which investors fear may lead to increased inflationary pressure going forward. That scenario would not be ideal for stocks. Against that backdrop…

The major averages finished sharply lower yesterday, with the Dow Jones Industrial Average, the tech-heavy NASDAQ Composite, and the broader S&P 500 Index falling 201, 146, and 24 points, respectively. The selling was broadbased, with even bigger percentage declines for the S&P Mid-Cap 400 Index and the small-cap Russell 2000. Overall, declining issues led advancers by a wide margin on both the New York Stock Exchange and the NASDAQ, to the tune of four to one on the Big Board. From a sector perspective, the biggest laggards were the technology, healthcare, energy, and consumer discretionary groups.

Turning to the day at hand, the main focus of the investment community is likely to be on the U.S. economy, with the Department of Labor releasing employment and unemployment figures for the month of September just a short time ago. The report showed that nonfarm payrolls increased by 134,000 in September, which was well below the consensus expectation of 180,000. The unemployment rate fell from 3.9% to 3.7% (the lowest level since December 1969), the labor participation rate held steady at 62.7%, and the hourly average wage rate climbed by eight cents (up 2.8% over the 12-month period). At first blush, the figures look disappointing, but when digging a bit deeper into the numbers, the report showed a sharply upward revision in prior months’ job figures and it noted that Hurricane Florence had an impact on the September figures. Investors seemed to think that the overall report did not change the narrative that the economy is strengthening and thus yields again moved higher shortly thereafter and that triggered some initial modest pre-market selling in the equity market.

But now as we move closer to the start of the final day of trading the week stateside, the equity futures are indicating rather flattish opening for the U.S. equity market. As noted, treasury yields are again on the rise, on expectation that the strong economy is strong and will push the Federal Reserve to raise rates again this year and stay on the monetary tightening course in 2019. That could weigh some on stocks this morning, but right now investors seem to be viewing the jobs report as “Goldilocks” report. That is the economy is strengthening, but not overheating. Overseas, nearly all of the major averages are in the red. The main indexes in Asia, with the exception of a gain for the Shanghai Composite, finished lower overnight, while the major European bourses are in negative territory as trading moves into the second half of the session on the Continent. 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.