After The Close - It was another nondescript session on Wall Street today. The lack of any major economic or earnings news on these shores, along with no new developments from Capitol Hill on the looming “fiscal cliff” negotiations did not give traders much to run with in either direction, and not surprisingly, the major U.S. equity indexes did not stray far from the neutral line. Overall, it was a slight win for the bulls, as advancing issues led decliners by a small margin on both the New York Stock Exchange and the NASDAQ.
From a sector perspective, nearly all of the 10 major groups finished the day in positive territory. There was leadership from the basic materials and industrial sectors, with the former rising on the strength of steel stocks and the latter helped by the transportation issues. Conversely, those investors long consumer cyclical, and, to a lesser extent, financial stocks, did not have much to cheer about. Financial shares were pressured by international news. Specifically, there were reports that Italy’s Prime Minister Mario Monti will step down after the struggling nation’s budget is passed. This raised concerns about the severity of Italy’s financial woes and what effect it would have on the world financial markets. Shares of most of the major U.S. banks, which have exposure to the European financial markets, were lower on the news.
As noted, there was little in the way of U.S. economic news to drive the markets today. However, that will change quickly, beginning with tomorrow’s figures on the international trade gap. The trade gap data kicks off a busy week on the economic front, which includes reports on producer (wholesale) and consumer prices, industrial production, and retail sales. Also this week, the Federal Reserve will meet for the last time in 2012 to discuss monetary policy, with the topics of bond buying and interest-rate guidelines likely to dominate the discussions. News on the bond-buying front could have an effect on trading, but our sense is that with investors clearly focused on the fiscal cliff negotiations, the impact will be muted.
But there was some interesting news from the corporate world, despite the inactivity on the earnings front. Before trading commenced on these shores, we learned that technology company Intermec (IN) had agreed to be acquired by Honeywell (HON). Then later on, shares of Hewlett-Packard (HPQ - Free Hewlett-Packard Stock Report) moved higher after rumors began to swirl that billionaire financier Carl Icahn is building a stake in the computer giant and Dow-30 component.
Elsewhere, the major European bourses after a difficult start to the trading week were able to rally to finish modestly higher. The European indexes fell on the aforementioned reports that Mr. Monti would resign after the next budget is completed. However, Europe’s investors unnerved by the news sought safety, and the blue chip shares in France, Germany and the UK were gobbled up quickly. The buying of blue chips in those countries pushed the major bourses into positive territory by the closing bell on the Continent.
Meantime, the uneasiness about Italy’s sovereign-debt problems pushed the euro lower versus the dollar today. The stronger greenback was not good news for the commodities markets, as it makes commodities less attractively priced in overseas markets. Not surprisingly, there was quite a bit of red ink across the New York Mercantile Exchange and the Chicago Board of Trade. Of note were sharp drops in the prices of coffee, cocoa, sugar, and corn contracts. Crude oil prices were also finished lower. Conversely, the price of gold, which is viewed as a safe-haven, was higher in the latest session. - William G. Ferguson
12:30 PM EST - The U.S. stock market is pushing into positive territory so far today, extending a few days of gains logged at the end of last week. Technically, the S&P Index is currently crossing over its 50-day moving average, located at 1,417. Notably, this area is widely-watched by technicians, and if the Index can move higher from here, it would certainly be seen as a bullish signal. Also, traders have shown some support for the market, especially in the afternoons, which suggests a commitment to the rally.
At just past noon in New York, the Dow Jones Industrial Average is up about 32 points (0.2%); the S&P 500 Index is ahead by about two points (0.1%); and the NASDAQ, which is displaying leadership today, is advancing 12 points (0.4%). Market breadth is mildly favorable, as advancing stocks are just ahead of decliners on the NYSE. Most of the market sectors are making progress, with gains in the transportation, technology, and basic materials stocks. However, there is weakness in the financial and consumer cyclical issues.
The U.S. market is holding up well, considering that there has been some political upheaval overseas. The European markets had been on a rocky course today, but have recovered into the close of the session. Italy’s Prime Minister Mario Monti has announced that he will resign after the country’s budget is finalized. Given Italy’s challenging financial problems, the news adds new uncertainty to the already cloudy situation.
Back on our shores, a resolution to the “fiscal cliff” issue has yet to be reached, and traders are likely reacting to the ongoing developments on that front. Clearly, signs of progress could provide the catalyst needed to produce a holiday stock market rally. Further evidence of a strong shopping season would also help. Meanwhile, there were no economic reports released this morning, but tomorrow things heat up, as we get a look at October’s trade balance, as well as the wholesale inventories report for the month of October.
The corporate news was light this morning. However, shares of Ingersoll Rand (IR) are trading higher on news that the construction machinery company reported that it will spin off its security business. Intermec (IN) stock is sharply higher, after that company agreed to be acquired by Honeywell (HON). Elsewhere, Diamond Foods (DMND) is back in the news, as that stock is lower on a weak earnings report. - Adam Rosner
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 - While there is not much news on the earnings front, there are a few stocks that could see active trading today. Shares of McDonald’s (MCD – Free McDonald’s Stock Report) are up moderately in pre-market trading, after the restaurant operator delivered better-than-expected November same-store sales. Too, shares of Nexen (NXY.TO) are indicating a sharply higher opening this morning, after Canadian regulators cleared the way for the petroleum company to be acquired by China-based Cnooc Ltd. Elsewhere on the M&A front, the stock of Intermec (IN) is soaring in the premarket, after the wireless networking company agreed to be acquired by diversified manufacturer Honeywell International (HON) for $10.00 a share. Another diversified company is in the headlines today, as Ingersoll-Rand (IR) has confirmed a plan to spin off its security technology business into a separate publicly traded company. Management also announced a dividend increase and share-repurchase program. The stock is trading modestly higher in the premarket as a result. – 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 put in a largely mixed performance to end the latest week, boosted by a better-than-expected report on non-farm payrolls, but held in check by another sharp drop, albeit a lesser one than in previous days, in the shares of Apple Inc. (AAPL).
Specifically, the nation created 146,000 new jobs in November, nearly twice the gain generally forecast, while the unemployment rate dipped further below 8%, dropping two-tenths of a percentage point to 7.7%. That was notably better than the 7.9% reading forecast. In fact, some pundits had seen the jobless rate ticking up to 8.0% in the latest month. True, the employment gain wasn't all that impressive, being just about in line with the 11-month average. But it was hurt somewhat by Hurricane Sandy, though less than earlier believed would be the case. Moreover, this good news was balanced out a bit by a drop in a consumer sentiment reading that is put out semi-monthly by the University of Michigan.
Then, there is Apple. That iconic tech stalwart, which remains the largest equity in terms of market capitalization, is in its own bear market, having seen its high-priced shares drop from $705 earlier this year to a close on Friday of $533. That 24% decline puts the issue, as noted, in bear market territory, which is consistent with a share price drop of 20%, or more. Now, in the pre-market this morning, the issue is indicating another eight points lower, at $525. The decline in Apple stock took the NASDAQ down another nine points on Friday. That composite, however, is still up 10% on the year, eclipsing the 8.2% gain in the Dow Jones Industrial Average thus far in 2012, and the 8.7% advance in the Standard and Poor's 500 Index over that same time span. Moreover, the NASDAQ 100, of which Apple is a member, is ahead by a stellar 14.0%. Apple shares, themselves, are still nicely higher on the year--only less so than they had been earlier.
As to the week ahead, the ongoing talks in Congress to avert the so-called fiscal cliff of mandatory tax increases and spending cuts are on the calendar, as the clock ticks down to the January 2, 2013 deadline. The sense among many legislators and observers is that the cliff deadline will not be met, although there is still a sense of urgency by some. Our feeling is that some late deal may yet be made, or the deadline extended into the first part of the new year. Should things not work out, though, there is the potential for a stock market setback of some note, given the potential for some economic dislocations over the course of the year. But the economy would not fall off a cliff immediately, in our view.
Meanwhile, in addition to the soap opera in Washington, there also is a busy week ahead for the economy. To wit, after a quiet day today, we will get data tomorrow on October's trade gap, where a slight increase in the deficit is expected. Then, on Wednesday, the Federal Reserve will issue its statement and any interest-rate action following the conclusion of its FOMC meeting. Thursday will then bring news on first-time jobless claims, retail sales, and producer prices. Finally, Friday will see the issuance of data on industrial production and consumer price inflation.
Ahead of all this, stocks in Asia finished the session generally higher, while equities are mostly lower in Europe this morning. And on our shores, our futures are pointing to a narrowly lower start with about a half hour to go before the start of the day's trading. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.