After The Close - Stocks spent most of their time in positive territory today despite a disappointing opening after the Federal Reserve offered no specific policy measures to boost the economy. The market seemed to take heart, though, when Fed Chairman Ben Bernanke suggested at a summit meeting in Jackson Hole, Wyoming that the nation’s central bank could take action later on, perhaps at September’s two-day FOMC meeting.
Mr. Bernanke noted that the recovery has come up well short up of expectations. Lingering weakness in the housing sector is proving a major deterrent to growth. The aftershocks of the financial crisis are also proving difficult to get past, with households and governments each saddled with more debt than is comfortably manageable. High, long-term unemployment is another big drag that is weighing on consumers. But the Fed Chairman’s promise to revisit the situation next month seemed to offer some hope that new policy initiatives might not be far off.
Overall, the Dow Jones Industrial Average gained 134 points, while the tech-heavy NASDAQ was up 60 points and the small-cap Russell 2000 rose 16 points. Market breadth was strongly positive, with advancing issues outnumbering decliners by a wide margin on both the Big Board and the NASDAQ. The utility sector was the day’s notable laggard, as fears of disruption to service rose as Hurricane Irene started to reach the nation’s East Coast. Shares of Consolidated Edison (ED) and Constellation Energy (CEG) fell as a result.
Meanwhile, gold prices regained their vigor today and moved sharply higher, erasing a good portion of Wednesday’s drop in the precious metal. Gold is still being sought after as a safe haven in these uncertain times. Elsewhere, trading in oil and government bonds was relatively quiet.
Today’s stock market gains padded the push to the upside for the week as a whole, and broke a month-long losing streak on Wall Street. Trading in August, a favorite time for vacations, is typically quiet, but this has been one volatile month that investors will be glad to get behind them.
Next week, the calendar is relatively light until Thursday, when economic reports on initial unemployment claims, construction spending for July, the ISM Purchasing Managers Index, and productivity are due out. Friday brings the closely watched monthly jobs report.
Stock market trading could be disrupted on Monday if the effects of Hurricane Irene result in significant damage. We wish everyone a safe weekend. - Robert Mitkowksi, Jr.
At the time of this article, the author did not have positions in any of the companies mentioned.
12:20 PM ET - The U.S. stock market is rallying sharply, after a weak opening. Sentiment seemed to improve after remarks from Fed Chairman Ben Bernanke. While nothing concrete was announced, the Fed did suggest that it still could stimulate the economy with various additional measures that would be under consideration at the FOMC‘s September meeting. Elsewhere, investors probably were not too surprised with the economic news released today. GDP for the second quarter was revised slightly lower, which came as no real shock. In a more favorable report, the University of Michigan’s Consumer Sentiment Index for the month of August was revised upward to 55.7 from 54.9.
In corporate news, it is a relatively quiet day. However, upscale retailer Tiffany (TIF) has posted strong quarterly results, beating expectations. The news sent that stock higher.
In the commodity markets, the price of oil was rising slightly but has since pulled back a bit. The move may have reflect an improved outlook for the economy. Gold, which suffered a pullback a few days ago, is advancing again.
As we pass the noon hour in New York, the major market averages are still holding their gains. The Dow Jones Industrial Average is now ahead by 147 points (1.32%); the S&P 500 Index is up 18 points (1.52%); and the NASDAQ, showing some leadership, is up 54 points (2.24%). The market’s breadth is positive with advancers now well ahead of decliners on the NYSE and the NASDAQ. Essentially, all of the market sectors are participating in the rally, with leadership in the technology and capital goods names. There was some relative weakness in healthcare and utility stocks earlier, however.
Some of the more heavily traded stocks advancing today include: Micron (MU), Aruba Networks (ARUN), Krispy Kreme (KKD), and Coach (COH). Stocks moving lower include: Omnivision (OVTI), Clearwire (CLWR), Yahoo (YHOO), and NetApp (NTAP).
Technically speaking, the S&P 500 is now down 14% from it May high. Notably most of the drop has come in August, which has been a panic ridden month. The index, hopefully, will find some support at 1,120, a level that has held on a couple of recent occasions. By other measures, such as momentum indicators and the Volatility Index (VIX), which reached almost 44, the market had gotten a bit oversold. Also, valuations have become reasonable, assuming we don’t head into a new recession. The P/E for Value Line stocks is 13.3 and the dividend yields are getting more attractive, especially when compared to the small yields offered on the Government 10-year Treasury note. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Opening Bell - The two-day surge in the major market indexes came to a rude and abrupt end yesterday, as skittish investors sold and intrepid buyers were basically nowhere to be found. In truth, not all of the prior session's gains were eroded, but enough of them were countered to produce a sizable setback. By the close, the Dow Jones Industrial Average, a 90-point winner early in the session, and, at its worst, a better-than-200-point loser, fell 171 points, to end the day at 11,150. In all, there was a better than 300-point swing from peak to trough. Also tumbling, and by an even bigger percentage, was the NASDAQ, which fell 48 points. Losers swamped winners on both the Big Board and the NASDAQ, as did new 52-week lows over new highs. It wasn't pretty.
Now, this morning, most eyes are on Jackson Hole Wyoming, where Federal Reserve Chairman Ben S. Bernanke is due to deliver a speech that Wall Street bulls hope will have an early holiday gift attached to it. That, in fact, was what we saw last year at this same locale, when the estimable Fed Chairman unveiled a second round of quantitative easing, popularly dubbed QE2. This time around the obstacles in the way of a third such effort are more formidable, as inflation is notably higher. Meanwhile, what few eyes are not on Mr. Bernanke this morning will be focused on Hurricane Irene, as that now Category 2 storm makes its way up the East Coast leaving devastation in its wake and threatening to exact untold tragedies and billions of dollars in costs in its presumptive path.
Meanwhile, yesterday's market was again influenced by Fed watching, as pundits and traders alike exchanged thoughts on where the Fed will be going. Earlier in the week, there appeared to be some optimism that the central bank would pull the proverbial rabbit out of the hat today. Yesterday, some rethinking of that stance had evolved, no doubt leading to some of the reversal in the market. Of course, there were other influences, such as a surprise increase in jobless claims in the latest week. A small decline had been expected. That result countered better-than-expected news the prior day on July durable goods orders. That earlier metric had played a role in Wednesday's strong showing in the market. Also influencing trading yesterday, but in a positive way, was the announcement that famed investor Warren Buffett was taking a major position in ailing banking giant Bank of America (BAC - Free BofA Stock Report). That news also helped to send the shares of other struggling banks and related financial institutions, such as Citigroup (C) and Morgan Stanley (MS) higher as well. When that early glow wore off, and stocks, in general, turned lower, the initial gains in the financial equities wound down somewhat, although most managed modest increases for the day.
Also falling yesterday was gold. The precious metal, which seemed to be going one way only--and that was strongly higher--has retraced a small percentage of its recent surge the past two days, falling from more than $1,900 an ounce on Tuesday, to the mid-$1700-an-ounce range yesterday. Oil, too, has been falling, and yesterday eased back below $85 a barrel.
Finally, and in addition to the Fed and Irene, investors are also looking at the economy this morning, with data just issued showing a downward revision in second-quarter gross domestic product. Initially, that period's estimated growth had been reported at 1.3%. Another dour international trade report in the interim, however, has helped to push that metric down from that initial pedestrian perch, with the latest estimate showing that growth was just 1.0% in the April-through-June period. Later on this morning, we will get data from the University of Michigan on consumer sentiment. Two weeks ago, that group's survey fell to a 30-year low. A further retreat seems likely in the latest report.
As for the equity market, the angst ahead of the speech by Mr. Bernanke has the equity futures heading lower at this time, so that with less than an hour to go before the start of the new trading day, a weak opening for Wall Street seems in prospect.
At the time this article was written, the author did not have positions in any of the companies mentioned.