After The Close - Stocks did little more than mark time on Tuesday, turning in a mixed performance after trading broadly higher for much of the day on hopes for new policy initiatives on the part of the Federal Reserve and a lessening in fears about the euro zone.
The Fed began its two-day Federal Open Market Committee this morning, and at its conclusion tomorrow afternoon, the central bank is widely expected to announce some sort of new measures to stimulate the economy. Wall Street would like to see another round of quantitative easing, where the central bank purchases bonds, but that may be too aggressive a step at this time. Inflation has not yet come down from its recent highs, and quantitative easing is viewed as stoking higher prices in the economy. Some type of lesser measure by the Fed, such as lengthening the duration of its balance sheet holdings to drive down long-term interest rates, seems to have better odds of being implemented.
As for the saga in Europe, at least for today investors seemed to take the view that the consequences of a debt default by Greece would be so disruptive that it will be somehow avoided.
Stocks stayed in a narrow range, holding on to a better-than 100-point gain posted by the blue chips by late morning, until about 3:00 P.M., when the market began to drift lower. By the session’s close, the Dow Jones Industrial Average was up a mere seven points and the NASDAQ had turned lower by 22 points.
One of the day’s big winners was the stock of cruise-ship operator Carnival Corp. (CCL). The company noted that advance bookings for 2012 were fetching higher prices. Shares of rival Royal Caribbean Cruises (RCL) traded higher in sympathy.
Tomorrow brings the aforementioned conclusion of the FOMC meeting, in which the Fed is likely to maintain its near-zero interest rate policy and, as noted, try something new to boost the economy’s fortunes. Also on tap is a reading on existing home sales for August. Little change is expected from July’s figure. On the corporate front, earnings are due out from retailer Bed Bath & Beyond (BBBY), cereal giant General Mills (GIS), and software distributor Red Hat (RHT). But unless there is some material news out of Europe, investors will probably be focused on what the Fed has to say when its policy meeting ends at around 2:15 P.M. EST. - Robert Mitkowksi, Jr
At the time of this article, the author did not have positions in any of the companies mentioned.
12:30 PM ET - After a weak start this morning, the U.S. stock market has moved strongly into positive territory, with traders likely looking for the Fed to intervene, once more. The lead bank, which recently completed a large round of asset purchases in June, is currently meeting to explore further easing options.
Meanwhile, uncertainty in Europe continues. A major ratings agency recently downgraded Italy’s debt, adding to investor fears. The difficulties in Greece are still unresolved. However, that nation continues to work on an austerity program in exchange for more aid. The major bourses are all rallying today, as they may have gotten oversold during the past few sessions. Notably, the euro is also trading higher at $1.37. Investors in Europe may be looking to support from China, and other nations.
Meanwhile, back in the U.S. the corporate news has been mixed. ConAgra (CAG) posted disappointing quarterly results, and said it is no longer pursuing Ralcorp (RAH). ConAgra was trading lower this morning. Things went a bit better for AutoZone (AZO). The auto parts company posted stronger-than- expected earnings, sending that stock is mixed. Meanwhile, tech giant Oracle (ORCL) is slated to put out its earnings report after the closing bell.
The economic news in the U.S. was largely negative. Housing starts for the month of August slipped to 571,000 units, down from 601,000 units in July. However, the figures for building permits, which may be more telling, were a bit better. On the international scene, the IMF tempered its outlook for the global economy.
At just past noon in New York, the Dow Jones Industrial Average is up 103 points (0.90%); the S&P 500 Index is adding on 12 points (0.97%); the NASDAQ is up 22 points (0.83%). Advancers are ahead of decliners by almost 3-to-1 on the NYSE, with a favorable showing in the NASDSAQ, as well. All the major market sectors are gaining, but there is a defensive tone to the session. Utilities are leading the market higher, with gains in the Consolidated Edison (ED) and American Electric Power (AEP). The healthcare sector is also making some strides, with leadership in Celgene (CELG), Medtronic (MDT), and Jazz Pharmaceuticals (JAZZ). There is also some strength in the consumer sector, with gains by Green Mountain Coffee (GMCR) and Procter & Gamble (PG - Free Procter & Gamble Stock Report). - 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 - Wall Street broke its latest winning streak yesterday, with stocks falling for the first time in more than a week. The impetus for the setback, which at one point had seen the Dow Jones Industrial Average shed more than 250 points before a late rally pared the deficit to 108 points, was more uncertainty about beleaguered Greece. That debt-strapped nation remains perilously close to defaulting on its debt, a development that would likely send shudders through the global financial network, on escalating fears that such a failure could spread to other debt-encumbered nations in the euro zone. The late rally came after a member of Greece's finance ministry said that European officials were near an agreement that would enable Greece to receive the next round of assistance. We will see where this goes.
As noted, the international jitters broke the rally on Wall Street that had persisted for five straight days. Those earlier gains had come principally on optimism over here that there might finally be some diminution in the financial pressures enveloping Europe, and on hopes that the Federal Reserve would again ride to the rescue of this nation's economy, when it meets today and tomorrow. In truth, there seems little of a traditional nature that the lead bank can do, but that said, it is likely to continue aggressively pumping money into the economy, perhaps via a third round of bond repurchases or by attempts to reduce long-term interest rates still further.
In the meantime, a new day will soon dawn on Wall Street, and once again, the optimism is building. Thus, following the aforementioned late rally yesterday that pared, in addition to the Dow's earlier 250-point loss, major early deficits in the NASDAQ and the small-cap Russell 2000, the futures are rallying strongly this morning.
Helping sentiment this morning were equity market gains in Asia and Europe overnight, expected action by the Fed to try and push long-term interest rates still lower. Earlier comments by international lenders that Greece must shrink its public sector spending to avoid running out of money within weeks did not dampen the sudden enthusiasm for stocks over here.
Meanwhile, the Commerce Department just released data on August housing starts, and the report showed that such activity declined by 5% last month, to an annualized rate of 571,000 homes. That was about twice the expected 2.3% falloff in such activity. Worse, July's decline was revised lower, to a drop of 2.3%, from a more modest setback that had been estimated earlier. Housing remains a woefully depressed sector of the economy, and a full-scale recovery is unlikely to get under way until we see some improvement in this business category.
The further retreat in housing, though, has not hurt the futures, which remain up strongly and suggest that when trading commences in about a half hour from now that it will do so to the upside and by a solid amount. We will see if this latest dose of optimism lasts. Much, we suspect, will depend on the Federal Reserve's monetary decisions, which will be issued at the conclusion of its two-day FOMC meeting tomorrow afternoon. Stay tuned. - Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.