After The Close - Stocks marked time today to close the week, and the month of November, as talks in Washington to avert a large amount of government spending cuts and tax increases made scant progress. President Obama’s budget proposal appears not acceptable to Republicans on Capitol Hill, which is not necessarily alarming, since there are still a few weeks to work with, and at least both sides are talking. But avoiding the "fiscal cliff’’ is a priority for Wall Street, since a recession in the first half of 2013 is feared if no intervening actions are taken.
The day’s economic news provided little inspiration, either. Data on personal income and spending came in weaker than thought, and the Chicago purchasing managers index was barely in-line with expectations.
At the end of the day, the Dow was up a few points and the NASDAQ was off slightly. Market breadth was narrowly negative on the New York Stock Exchange.
In the corporate world, shares Yum! Brands (YUM) fell sharply when the owner of Taco Bell, KFC, and Pizza Hut indicated that profit growth in 2013 would be less than previously thought.
For November as a whole, stocks were mixed, with the Dow falling about 0.5% and the NASDAQ rising 1.0%. Trading was choppy as the focus shifted to the impending fiscal cliff immediately after the November 6th Presidential Election.
Next week, the focus on government budget talks is sure to continue. In fact, the ebb and flow of that process may negate the impact of much of the economic data due out, which is also being skewed to a degree by the effects of Hurricane Sandy.
Overall, there is still some time to work out a compromise to avoid going over the fiscal cliff, and hopes are for a deal both sides can live with being reached at least a week before the January 2nd deadline. But rising stock market volatility cannot be ruled out if budget talks don’t seem to be going anywhere by mid-December. If last year’s debt-ceiling negotiations are a guide, Wall Street may not be very tolerant of high-stakes brinkmanship on the part of politicians in Washington. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the stocks mentioned.
12:00 PM EST - It has been an uneventful session on Wall Street thus far today. As we pass the midday hour on the East Coast, the major U.S. equity indexes are not far removed from the neutral line and have been that way since the start of trading on these shores—though some selective selling recently now has the Dow Jones Industrials, the NASDAQ, and the broader S&P 500 Index modestly in the red.
The lack of any further details in the ongoing “fiscal cliff” negotiations, which has driven trading in recent sessions, is likely behind today’s malaise. Investors also had minimal reaction, at least initially, to some subpar data on personal income and spending issued at 8:30 A.M. (EST). Still, there is a negative tone to the trading, with the spread between declining and advancing issues widening on both the Big Board and the NASDAQ in favor of the former in the last hour. This may well be the result of the aforementioned dour U.S. economic data (more below).
Not surprisingly, looking at the performance of the 10 major sectors thus far, none stand out. A bit of leadership is coming from the energy group, but even the advance there has not been noteworthy. Slightly higher prices for crude oil on the New York Mercantile Exchange may be fueling the mild support for energy stocks. Still, most of the major sectors, with the exceptions being the energy and utilities groups, are lower at the midday hour.
The economic news that came out today was far from uplifting. Specifically, the U.S. government reported that personal income in October was flat, while spending decreased modestly. This one-two combination of data, which only included a few days of the devastating effects of Hurricane Sandy on the East Coast, is not a particularly reassuring sign about the psyche of the U.S. consumer as the holiday shopping season heats up. Not surprisingly in light of this report, the consumer discretionary sector is the biggest laggard thus far today, with notable weakness in the stocks of automakers and high-end retailers. In other economic news, the November Chicago PMI reading of 50.4 came in slightly below economists’ expectations, but it was up from the prior month's reading of 49.9.
Meantime, the news from overseas was a bit more market supportive. On the Continent, the major bourses initially rose on news that Germany has agreed to the latest (third) installment of bailout loans for debt-encumbered Greece. If that euro-zone nation were to default on its obligations it could well have far-reaching implications for the world financial markets. The latest news, which may be nothing more than a case of kicking the can down the road, was initially cheered by investors, but some of the earlier gains—all in the case of France’s CAC-40—have been erased as trading nears its conclusion in Europe. Meanwhile, Asia’s major indexes were higher overnight, as investors welcomed news of Japan’s decision to further stimulate the nation’s struggling economy. Historically, such stimulus measures are positively greeted by market participants, and that appeared to be the case once again today.
Looking ahead to the afternoon, absent some late-breaking developments on the looming “fiscal cliff” front, trading may well continue on its choppy course. The bears currently hold a slight intraday lead on the bulls, but as we have seen in recent weeks that can change rather quickly. Stay tuned. - William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Stocks to Watch from The Survey – Earnings reports are still trickling in, including a pair of disappointing releases from Zumiez (ZUMZ) and Pacific Sunwear (PSUN), both of which sell action-sports related clothing and accessories. Those stocks are trading notably lower in the premarket. Investors were not impressed with October-period results from footwear and accessories retailer Genesco (GCO), either, and that stock is also indicating a lower opening this morning. In the same vein, drugmaker Teva Pharmaceuticals (TEVA) and restaurant operator Yum! Brands (YUM) both issued updated guidance that did not sit well with the investment community. Yum’s outlook was particularly disappointing, and that stock is down sharply ahead of the bell, while TEVA shares are indicating a more modest decline.
In other news, shares of Tellabs (TLAB) are up nicely in pre-market trading, after the telecommunications equipment company declared a special cash dividend of $1.00 a share. On the other hand, shares of Zynga (ZNGA) are down notably in the premarket, after the online game developer’s relationship with social network operator Facebook (FB) changed, opening the door for Facebook to develop its own games (Facebook is the primary platform for consumers to access Zynga’s games). – 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 stock market pressed forward again yesterday, as a yearend rally appeared to be taking hold down on Wall Street. In fact, this is the second week in a row that prices have been rising, and, in the process, climbing the proverbial wall of worry. That is because, notwithstanding some earlier hopeful comments from the leaders of both political parties in Washington, the reality seems to be that the sides remain quite far apart in orchestrating a deal that would avoid the so-called fiscal cliff of mandated tax hikes and spending reductions that are now set to go into effect on January 2, 2013.
Yesterday, however, in spite of the political drama in Washington, stocks rose, albeit moderately, on better economic news. It seems that the nation is recovering from the tragic hurricane that struck the Northeast on October 29th, at least to a degree. Specifically, the latest session saw the issuance of improving jobless claims data, as that closely watched weekly metric fell below 400,000 for the first time since the onset of that aforementioned storm. Then, the Commerce Department released figures showing that the nation's gross domestic product had increased by a somewhat more formidable 2.7% in the third quarter. This was a revised GDP report following the initial look at the recent period some four weeks earlier. At that time, the GDP advance had been estimated at 2.0%. There is one more scheduled look at the third quarter, and that will come late next month.
Now, such a marked revision, which included better data for exports and inventories, would normally have been greeted much more enthusiastically by Wall Street, where the Dow Jones Industrial Average gained 36 points on the day and the NASDAQ tacked on 20 points. However, growth in the current quarter may total about half the third-quarter rate, reflecting the hurricane's lingering effects and the likely drawdown of those recently inflated inventories.
Meanwhile, we saw some less-than-upbeat sales issuances by big-name retailers over the past four weeks. And that news also served to cap the market's gains in the latest session. Target (TGT) and Kohl's (KSS), in particular, produced subpar sales matchups in the most recent month. Target shares were basically unchanged on the session. However, Kohl's, which did even worse in the latest month on a sales basis, with volume actually declining, saw its shares drop sharply on the day.
But the big influence in the latest session, and a continuing cap on the market's rally, remains the feared fiscal cliff. After both sides had expressed some optimism earlier in the week, as we noted above, their more recent comments have been less warmly received by the markets. And with good reason. That is because in the late afternoon, House Speaker John Boehner said there had been little progress and that the sides remained far apart. So, the market, which had approached an 80-point gain earlier in the Dow, fell back somewhat. Our sense is that the continuing standoff and resultant hard feelings on both sides, following the recent contentious election, will keep the market vulnerable to sudden twists and turns in the weeks ahead and produce generally higher levels of volatility.
As for other news, the Commerce Department has just reported that personal income was unchanged in October, while personal consumption expenditures fell by 0.2%. Those weak reports aren't doing too much to the equity futures, though, which now still suggest a mixed opening to the market when trading gets under way in about a half hour from now. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.