After The Close - U.S. equities moved again in a mixed fashion on Friday, as the bulls were ultimately unable to negate Tuesday’s steep selloff. Market breadth favored neither advancing nor declining stocks, as strength in the healthcare, financials, and utility sectors was cancelled out by a bearish undertone in the basic materials, energy, and technology groupings. The indexes exhibited a similar schism, with a modest uptick from the Dow offset by softness in the S&P 500 and a sharp selloff from the NASDAQ.
Meanwhile, crude oil registered a roughly 3% decline in per-barrel value, as investors braced themselves for the economic consequences of Hurricane Irma. The storm is the second major Hurricane to hit the southern tier of the United States in recent weeks, and threaten more productivity challenges as well as likely-to-be massive costs for insurance providers. With Hurricane Harvey shutting down one fifth of the country’s refineries, there may be more volatility in oil production on the near-term horizon.
Overall, concerns over the impending storm helped to mute a positive reaction to a solid wholesale inventory release from the Commerce Department. The report revealed a 0.6% increase in July, continuing the strength shown in the prior month.
So, the largely flat session did little to pull the major averages out of their week-long ruts. The bulls will look to rebound Monday. However, with the growing likelihood that the Federal Reserve will hold off on enacting additional interest rate cuts in 2017, traders likely require some positive updates from Washington to stoke valuations meaningfully higher. Specifically, details regarding the Trump Administration’s tax-reform strategy could play an outsized role in determining how stocks react after the weekend. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
12:20 PM EDT - Equities got off to a weak start this morning, but have managed to firm up selectively since then. At roughly noon in New York, the Dow Jones Industrial Average is ahead 35 points, while the broader S&P 500 Index is off nominally, and the NASDAQ is down 20 points. Market breadth shows a divided session, with advancers about even with decliners on the NYSE. From a sector perspective, the financial names are making progress, while the energy and basic materials issues are weighing on the market.
Meanwhile, traders received limited economic news this morning. However, there was one report worth mentioning. Specifically, wholesale inventories increased 0.6% during the latest survey, which was a slightly better figure than had been anticipated. Elsewhere, adverse weather in the Caribbean and parts of the United States will likely have profound economic consequences and may well impact some corporations, such as energy operators and insurance companies, in particular, as well as third-quarter GDP.
Finally, a few corporations posted their financial results over the past 24 hours. Specifically, shares of The Kroger Company (KR) are trading lower after the grocery store operator delivered weak quarterly results and provided an unimpressive outlook. Shares of Science Applications International (SAIC) are also losing ground in response to a weak issuance. Elsewhere, Equifax (EFX) is seeing its stock plunge on news of a sizable data breach.
Technically, stocks continue to look for a more solid footing. However, the bulls seem a bit fatigued at this point. - 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 - This has certainly been a choppy, volatile, and uncharacteristically uncertain holiday-shortened week on Wall Street so far. On point, the stock market sold off sharply on Tuesday, the first day back after the Labor Day Weekend, on rising fears about North Korea's mounting nuclear arsenal. Then, the Street attempted to fashion a modest comeback on Wednesday and largely succeeded. But yesterday, after a higher start, the market again reversed course and started to fall. That mid-morning descent would continue for about half the morning, with the market showing a modest tilt to the downside during that time.
Behind yesterday's early setback, was a retreat in the financial stocks, resulting from a further decline in interest rates. Specifically, the yield on the 10-year Treasury note eased back to 2.04% in morning trading. The weakness in the financial and banking stock group pushed the Dow Jones Industrial Average down by some 30 points, at its morning nadir, after an opening rise of some 45 points. Losses also were tabulated by the S&P 500 Index, the S&P Mid-Cap 400, and the small-cap Russell 2000. The NASDAQ, though, managed to edge slightly into the plus column for a stretch.
As for the market, the comeback on Wednesday was helped by a reassuring Beige Book economic summation that pointed to no immediate interest-rate increase on the part of the Federal Reserve, and perhaps no upward adjustment in borrowing costs until 2018. Also helping Wall Street was an agreement between President Trump and Democratic Congressional leaders Nancy Pelosi and Chuck Schumer on the contentious debt-ceiling issue. The Republicans were less in step on this matter. A House vote is scheduled for today. Also of note, there was a chorus of Fed governors on the speaking docket during the day.
Things then started to turn positive once again as we moved into the morning's late stages, but that recovery was brief, and as we passed the noon hour in New York, the red arrows were back in force, with the Dow falling to a deficit of some to 60 points as we moved into the first part of the afternoon. Among the casualties on that blue-chip composite was General Electric (GE - Free General Electric Stock Report) on critical comments by analysts. Entertainment giant Walt Disney (DIS - Free Disney Stock Report) also was off sharply, falling several dollars below $100 a share, as the company reduced earnings expectations for the year.
This downward drift in the market continued into the middle and latter stages of the afternoon, with the Dow, weakened by the sharp losses in GE and Disney. Elsewhere, the damage was contained, with even some pockets of strength observed. The losses then deepened somewhat as we moved further into the afternoon, before some last-minute buying helped lift the S&P 500 back to near the unchanged mark and put the NASDAQ incrementally into the black. As for the Dow, weighed down as it was by GE and DIS, it fell by 23 points. Modest losses also were suffered by the S&P 400 and the Russell 2000.
Looking out at the final session of the week, we see that the market in Asia were lower in the overnight hours, while in Europe, the major bourses are following a weaker pattern, as well, in early dealings. At the same time, Treasury note yields, off again yesterday, finishing at 2.06%, are now pointing downward again, with a yield of 2.03% in the early going; oil, a gainer once more yesterday, is flat, as Hurricane Irma is awaited; and gold prices are up so far today. As to other news, the economic calendar is light, but in Washington, the House is scheduled to vote to increase the debt ceiling today. Finally, U.S. equity futures are suggesting a lower opening for the stock market when trading resumes this morning. - Harvey S. Katz, CFA