After The Close - The U.S. stock market put in a choppy and somewhat directionless session today, with no real progress being made. At the close, the Dow Jones Industrial Average, the broader S&P 500 Index, and the tech-heavy NASDAQ were all largely unchanged. Market breadth was largely mixed, as declining stocks outnumbered advancers by a narrow margin on the NYSE. The major market sectors also showed a lack of clear direction. There was some strength in the financial, transportation, and capital goods stocks. However, this was offset by weakness in the technology, utility, and energy names. Technically, the S&P 500 Index has pulled back, and is now 6% off from its 52-week high. The index may be looking for some support near its 200-day moving average, located at around 1,380.
Overseas, traders in Europe may have been feeling a bit better about the situation in the region. Specifically, Greece’s Parliament agreed to a 2013 budget, which is likely a step in right direction. The move comes as that country looks for additional bailout funding. However, the markets on the Continent ended mixed. Further east, China released a better-than-expected trade figure, as improved export levels may suggest that the economy there is expanding.
On our shores, there was no important economic news released. Tomorrow will also be a light day for economic reports. However, traders did receive a decent batch of corporate news items today. It seems that merger and acquisition activity is picking up. Specifically, Titanium Metals (TIE) stock soared after the company agreed to be purchased by Precision Castparts (PCP). Also, Jefferies Group (JEF) stock rose sharply, after reporting that it will be merging with Leucadia National (LUK). Increased M&A is always good to see, as it indicates that companies are still looking to expand, and may further signal that some stocks are undervalued. On the earnings front, Beazer Homes (BZH) saw its stock sink on a weak bottom-line release. DR Horton (DHI) shares also were lower, even though the company reported solid figures. As a group, the Home Builders Trust (XHB) was off sharply, suggesting that these issues, which have had a good run lately, may be taking a breather.
Stocks that moved up sharply today included Gilead Sciences (GILD), Celgene (CELG), and Kronos Worldwide (KRO). Stocks that headed lower included J. C. Penny (JCP) and Dominion Resources (DOM). - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:10 PM EST - The major U.S. equity indexes have seesawed back and forth so far today, but have not strayed very far in either direction from the neutral line, though as we pass the midday hour on the East Coast, the bears hold a slight upper hand right now, as declining issues currently outnumber advancers on both the Big Board and the NASDAQ. Much like last week, investors appear to be unnerved by the looming negotiations on Capitol Hill to avoid the “fiscal cliff” scenario from becoming a reality on January 2, 2013, as well as by the lingering sovereign-debt problems in the euro zone (more below).
From a sector perspective, some leadership is coming from the healthcare group. Healthcare is being led higher by two stocks in particular, Celgene (CELG) and Gilead Sciences (GILD). Shares of Celgene jumped after the biotechnology company reported that its Phase III trial of Abraxane in pancreatic cancer showed a statistically significant survival benefit, while the stock of Gilead Sciences rose on reports of a 100% sustained virologic response rate for an Interferon-free regimen of Sofosbuvir and Ribavirin in treatment of Hepatitis C patients. The news is also having a positive effect on the shares of other biotech names, including Alexion Pharmaceuticals (ALXN) and Regeneron Pharmaceuticals (REGN). Besides the healthcare space, the only other two groups showing a modest advance are the telecoms and the industrials. Conversely, the utilities group is the biggest laggard among the top 10 sectors.
Meantime, the earnings news was led by a few homebuilders this morning. D.R. Horton (DHI) and Beazer Homes (BZH) reported mixed results and shares of both builders are lower thus far today. The Atlanta-based Beazer reported a wider September-quarter net loss on a stronger-than-expected revenues, while Texas-based D.R. Horton fared better, with profits nearly tripling in the fiscal fourth quarter, to $0.30 a share. Both homebuilders reported a jump in new home orders last quarter, which is another positive signs for the recovery in the homebuilding industry.
It is also shaping up to be a mixed day for commodities. The two most closely watched commodities, gold and oil, are relatively unchanged. However, there is a sea of red ink across the agricultural category. Soybean, oats, and corn futures are notably weaker, along with contracts for orange juice and lumber. Conversely some strength is being seen in the precious metals, energy and soft groups.
Elsewhere, as trading nears a conclusion on the Continent, the European bourses are putting together a nondescript showing. France’s CAC-40 is in the red, while Germany’s DAX and London’s FTSE-100 are nominally higher. The day’s big news on the Continent came from Greece. The financially struggling nation’s Parliament approved a budget of spending cuts and tax increases for 2013. These austerity measures—which have been met with great opposition in Athens—should allow the country to receive the bailout loan needed to keep it from defaulting on its debt obligations—a scenario that would likely have wide-ranging effect on the world financial markets.
Looking ahead to the remainder of today’s session, there doesn’t appear to be much in the way of earnings and economic news to have a major impact on which way the market finishes. Our sense is that investors will continue to look for more clues on how the looming “fiscal cliff” negotiations will progress. Just this morning, we learned that the White House plans an aggressive public campaign to build support for its approach to reduce the deficit through tax increases and spending cuts. This would be a change from President Obama’s private talks with Republicans that faltered last year and possibly a major step in the direction to an agreement between the two political parties before yearend. We’ll see. Stay tuned. - William G. Ferguson
Stocks to Watch from The Survey – Homebuilders are in the earnings spotlight today, as both Beazer Homes (BZH) and D.R. Horton (DHI) reported September-period results this morning. D.R. Horton had a good quarter, and that stock is up moderately in the premarket. On the other hand, Beazer beat on the top line, but its quarterly loss was wider than anticipated.
There is news out of the healthcare sector, as well. Shares of Celgene Corp. (CELG) and Gilead Sciences (GILD) are both indicating sharply higher openings this morning, after the drugmakers each reported encouraging results from separate clinical trials.
There was also some M&A activity over the weekend. Notably, shares of Titanium Metals (TIE) are surging in the premarket, after the metals and mining company agreed to be acquired by Precision Castparts (PCP), which makes complex metal components and products for aerospace and industrial markets. Shares of investment bank Jefferies Group (JEF) are also up sharply ahead of the bell, on news that Leucadia Corp. has stuck a deal to buy the rest of the company it does not already own. – Matthew E. Spencer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The recent turmoil in the stock market, which was underscored by a 434-point two-day plunge in the Dow Jones Industrial Average on Wednesday and Thursday, eased notably on Friday, as the market attempted, albeit half-heartedly, to stage a comeback. That attempt, while not dramatic, still managed to leave the market narrowly higher on the day, with the Dow adding four points and the other averages generally doing a bit better, notably the NASDAQ, which added nine points, or 0.32%.
For the week, though, the Dow lost 2.1%, while the other averages generally performed equally poorly, and in some cases even a bit worse. Behind this loss of investor confidence were fresh concerns about Europe, where Greece has just signed onto a new austerity package, amidst no shortage of unhappiness there. Meanwhile, there are signs that Spain may need a bailout, while European Central Bank President, Mario Draghi warned last week that Germany and France, the two strongest economic powers in the region, would be affected by the euro zone's wide-ranging recession.
Closer to home, there are rising concerns that the two political parties in our country, fresh off of what may well have been the most contentious Presidential Election in decades, will not reach a deal in time to avert the dreaded fiscal cliff of mandated tax increases and spending cuts that are due to kick in at yearend--specifically January 2, 2013. The thought of that unwanted outcome and the greater chance for a recession in our country if that should happen, is logically frightening investors. Also, we have come to the near end of a generally disappointing quarterly earnings season. A number of high-profile profit misses has shaken the confidence of many investors. Finally, the cost of the cleanup from Hurricane Sandy is mounting, with estimates now on the order of $50 billion. We sense this number could go higher.
Now, a new week dawns, and while the aforementioned earnings season is practically in the books, we will be hearing from a few stragglers, mostly though from companies, notably the retailers, that have third quarters that ended in late October. Those companies are just starting to post results now. Among the high-profile names in that category, which will be reporting over the coming five-day stretch, are building materials maker and retailer, and Dow-30 component, Home Depot (HD – Free Home Depot Stock Report). Also reporting tomorrow, along with Home Depot, is fellow Dow component and networking giant Cisco Systems (CSCO – Free Cisco Stock Report). A third Dow member, retailing behemoth Wal-Mart Stores (WMT – Free Wal-Mart Stock Report), is scheduled to release its results for the third (October) quarter on Thursday. A good number of non-Dow stocks are also on the earnings docket for the five days upcoming.
As for economic news, in addition to the tidings from Europe and now China, where data out over the weekend showed a firming in export activity, we will get reports on U.S. business activity, led by figures on retail spending and producer prices on Wednesday, consumer inflation on Thursday, and industrial production and factory use on Friday.
Ahead of all this, the equity futures are pointing to a better start when trading gets going in about a half hour from now, as the Standard and Poor's 500 Index futures are up by about four points and the NASDAQ futures are better by some 13 points. We also add that today is Veteran's Day, when we honor those who have made sacrifices, some the ultimate sacrifice, so that we can continue to enjoy our cherished freedoms. Let's not forget those brave men and women who gave and, in many cases, still give their all. Finally, Wall Street will have normal trading today, but the bond market is closed for the Veteran's Day observance. – Harvey S. Katz
At the time of this article's writing, the author had positions in CSCO.