After The Close - The equity markets put in a mixed performance today, as investors again took profits in the volatile technology sector. At the end of the day, the Dow Jones Industrial Average was ahead 21 points; the broader S&P 500 Index was down 11 points; and the NASDAQ was lower by 72 points (an almost 1% drop). Market breadth was negative, as losers outpaced winners on the NYSE. From a sector perspective, the energy and technology names weighed heavily on the market. In contrast, the high-yield utility issues managed to advance, as traders may have been looking for safe havens.
Meanwhile, the nation’s employment situation returned to the spotlight this morning. According to payroll processor Automatic Data Processing (ADP) 163,000 jobs were added to the private sector during the month of August, where a higher figure was expected. Meanwhile, initial jobless claims moved lower to 201,000 for the week of September 1st, which was a constructive reading. We will get a closer look at the job market tomorrow morning, when the government releases its August employment figures. The report will be watched closely by Wall Street, as investors speculate about the Federal Reserve’s next course of action. Of note, the FOMC is set to make an interest-rate decision later this month. We expect an increase at that time.
In corporate news, a few technology companies seem to be tempering their business outlooks. Specifically, shares of KLA-Tencor Corp. (KLAC) sank in price after the technology company warned that business may well slow in the months ahead. Further, shares of Micron (MU) lost ground, due to concerns about a more competitive pricing climate.
Technically, the stock market put in a solid showing in the month of August, but has gotten off to a soft start in September. To some extent, a pullback here is understandable, and maybe even healthy, given elevated equity valuations. - 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 - Stocks struggled for direction out of the gate yesterday, with moderate initial losses, some attempt as a nominal comeback after the first few minutes, and additional slippage as we moved a little further into the morning. The major areas of early weakness were the NASDAQ and the small-cap Russell 2000. The Dow Jones Industrial Average, often the weak link this year, was proportionately a bit stronger. As before, the key focus was on international trade. The resumption of such talks between the United States and Canada was the primary area of concentration, with optimism building after the two countries had earlier failed to reach a deal on trade.
Another reason for the early weakness in most of the averages was the setback in the emerging markets, as investors were worried about the eroding financial situations in Argentina and Turkey. Rising trade tensions between the United States and China were also keeping a lid on stocks. Meantime, also falling early yesterday were energy stocks, as crude oil faltered somewhat after rising on Tuesday. But the big story line in the market after the first few minutes of trading was the sharp setback in the NASDAQ, as some high-profile names were hit hard in a rash of profit taking.
The selling in the NASDAQ intensified as the first hour concluded, with that composite falling by a full percentage point. The other indexes, then seeing this weakness, pulled back further, but nowhere near the extent of the NASDAQ, which saw major losses in some high-profile names, such as Amazon.com (AMZN) and Alphabet (GOOG), the parent of Google. The NASDAQ then fell further as we moved into the second hour of trading, tumbling to a late-morning loss of about 130 points before recovering somewhat. Meantime, the Dow, once off 80 points, pared that loss as the morning wound down.
In other news on this data-driven week, we saw the release of international trade figures for July, in which the U.S. trade imbalance rose to $50.1 billion from June's $45.7 billion. The deficit was about a billion dollars larger than forecast. Behind the growing deficit was a drop in exports in July and a run-up in imports. All of the increase could be accounted for by a rise in the goods deficit; the services deficit actually eased nominally. Going forward, we will be getting news on non-manufacturing activity later this morning and tomorrow we will see the key monthly release when the Labor Department reports on non-farm payrolls for August.
The market then tried to rally as the afternoon moved along, seeing some selective successes in that regard, with the Dow pressing forward into the plus column, albeit rather indecisively, with modest gains. The NASDAQ, however, continued to trend notably downward, but stayed well off of its morning lows as the final two trading hours began. Things would remain as before over the next couple of hours, as the Dow generally stayed in the plus column, while the smaller issues and composites also began to firm up. With no new breakthroughs apparent on the trade front, it was all about profit taking on the tech side.
The landscape changed little down the stretch of the latest session, with the Dow going in and out of the plus column, while the NASDAQ remained deeply in the red, but still off of its worst levels of the trading day. Also off sharply on the NASDAQ, which contributed to its steep losses on the day, was the stock of Netflix (NFLX), which shed more than 6% on the day. At session's end, the NASDAQ would be down 961 points, while the Dow, with some last-minute buying would finish the day up by 23 points. All in all, it was a somewhat difficult day, but not a real game changer for a market that remains in the grip of the bulls.
Looking ahead to the week's penultimate trading session, we see that stocks were lower in trading overnight in Asia on emerging market concerns. In Europe, the leading bourses are heading higher in spite of simmering trade issues, at this hour. In other markets, oil prices are up marginally; yields on the 10-year Treasury note, which ended flat yesterday, are showing little change again this morning; and the equity futures on our shores are signaling a start open to the session up ahead. – Harvey S. Katz, CFA