After The Close - It was a dull conclusion today to a decent week for equities on Wall Street. In fact, for much of the session the major equity indexes did not stray too far from the neutral line, as some positive economic news from overseas and a good report from another financial services giant was offset by a somewhat disappointing report from a technology heavyweight and a lower-than-expected reading on consumer sentiment (more on each below). However, by the closing bell, some selective late-day buying did push the Dow Jones Industrial Average and the S&P 500 Index, which hit a new five-year high this week, modestly into the black and erased most of the earlier losses in the tech-heavy NASDAQ.
On the positive side today was a strong quarterly report from Morgan Stanley (MS). Shares of the financial services giant rose after the company posted better-than-expected top- and bottom-line results. The report comes on the heels of Goldman Sachs’ (GS) strong results earlier this week. Dow-30 component General Electric (GE - Free General Electric Stock Report) also delivered solid results in the latest quarter and the stock of the diversified giant moved higher today. Meantime, investors both here and abroad were happy to learn that China’s economy grew at a faster-than-expected 7.9% pace in the final quarter of 2012.
However, not everything was rosy on the earnings front. Shares of chipmaker Intel (INTC - Free Intel Stock Report) were weaker after the company said after yesterday’s market close that weak demand for personal computers is hurting its financial performance. A shift in consumer spending from personal computers, most of which use Intel chips, to smartphones and tablets, which don't, is behind the weaker demand trend. The decline in the price of Intel stock, along with weakness in shares of Apple (AAPL) and Google (GOOG) were the primary reasons why the tech-heavy index underperformed, relative to the Dow 30 and the broader S&P 500 Index, today.
Meanwhile, the economic news on these shores was not encouraging, as the University of Michigan’s Consumer Sentiment Index unexpectedly fell to a one-year low in January. Confidence among American households has weakened in recent months, as higher payroll taxes will lower monthly paychecks for most Americans in 2013 beginning this month. The reading also raises concerns that the biggest part of the economy will slow in early 2013. Not surprisingly, consumer cyclical stocks did not perform as well as some of the other major sectors in the final trading session of this week.
We also received some news from Capitol Hill this afternoon, as reports surfaced that House Republicans next week will draw up a bill to extend the U.S. debt ceiling by three months, a maneuver that would push the deadline for raising the borrowing limit to mid-April. Although President Obama wants the Congress to pass a bill to raise the limit without the spending cuts Republicans insist on, reports are that the White House is “encouraged” by the proposal. Our sense is that this news from Washington helped the markets in the final hour of trading. Still, the prevailing sentiment is that the road to an agreement between the two political parties may be long and contentious, which will likely draw the attention of investors once earnings season concludes.
Looking ahead to next week—which will only feature four days of trading on these shores as the markets are closed on Monday in observance of Martin Luther King’s birthday—the eyes of investors will remain focused on the corporate world. The earnings reports will continue to pour in, while the economic news will be light, with the only notable reports on existing and new homes sales, which are due on Tuesday and Friday, respectively. The condensed trading week will bring quarterly reports on 11 Dow-30 components, as well as the latest earnings from tech behemoths Google and Apple. The Apple results are likely to be highly scrutinized as shares of the iPhone maker have been quite volatile of late. Speaking of volatility, investors should note that the S&P 500 Index (or VIX) ended the week below 13, a level that clearly suggests that the market is overbought. Thus, if the earnings news was to disappoint next week or we get dour tidings out of Washington, a mild selloff, at the very least, could evolve. -William G. Ferguson
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
12:20 PM EST - The U.S. stock market is putting in a weak performance today. As we pass the noon hour in New York, the Dow Jones Industrial Average is down 18 points ( -0.1%); the S&P 500 Index is off four points (-0.3%); and the tech-heavy NASDAQ is weighing on the market, off 16 points (-0.5%). Market breadth indicates a mixed tone to the session, as declining stocks are outweighing advancers by a narrow margin on the NYSE. Weakness can be found in various market sectors. Specifically, the consumer cyclical issues and the technology stocks are weak. The healthcare group is also heading lower today. Nonetheless, there is some strength in the conglomerates, and in the utilities.
Technically, the S&P 500 Index made its way into new 52-week high ground yesterday. In addition, that move was accompanied by strong volumes, indicating that traders were committed to the rally. Some consolidation in the market today is understandable, given yesterday’s progress. Hopefully, the S&P 500 Index can hold its gains and even build on them. In the event of some weakness, we would look for possible support at the 1,460 level, an area that provided resistance in September and October, and then offered support in early January. If the market moves lower than that, the 20-day moving average at about 1,450 might be an area to watch. While usually moving opposite the broad market, the VIX is lower to 13.10 today.
Traders did not receive much economic news this morning. However, the University of Michigan’s Consumer Sentiment Survey provided a reading of 71.3 in January, which was quite a bit lower than had been widely expected. Going into next week, Monday is a holiday, but on Tuesday the housing market is back in the spotlight with the existing home sales for December due out.
The fourth-quarter earnings season is now picking up. Today, we received a few important reports. Dow component General Electric (GE – Free GE Stock Report) shares are up, after the conglomerate put out decent results. Also, in the Dow, Intel (INTC – Free Intel Stock Report) stock is slipping, as the semiconductor giant reported mixed results. In financials, Morgan Stanley (MS) shares are higher, helped by better-than-expected profits.
Stocks rising in price today include Life Technologies (LIFE), Movado (MOV), State Street (STT), and Sony (SNE). Stocks slipping in price include Finisar (FNSR), Advanced Micro Devices (AMD), and Capital One Financial (COF). - 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 - The pace of earnings season begins to pick up today, as the market will digest results from two Dow-30 entities. Tech behemoth Intel (INTC - Free Intel Stock Report) released its figures at yesterday’s close and industrial conglomerate General Electric (GE - Free General Electric Stock Report) did the same earlier this morning. The former shares will likely be under some pressure due to the fact fourth-quarter revenues were shy of expectations, while the latter is up in the premarket on favorable news from its emerging markets operations.
Morgan Stanley (MS), the top global equity underwriter last year, reported share net that was higher than consensus expectations, as strength in its brokerage unit propelled results. Its shares were up handsomely in the premarket.
Anticipation continues to build for the release of Research In Motion’s (RIMM) newest smartphone offering, the Blackberry 10. This stock, which fell precipitously through most of 2012, has shown some signs of life lately, and should open strongly ahead again today.
Oil and gas equipment concern Schlumberger Ltd. (SLB) also reported earnings before the market opened. The initial news here was not compelling, as management said fourth-quarter profits declined 3.5% on contract delays and less onshore drilling in the U.S. - Erik M. Manning
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 broke out of its recent holding pattern yesterday, boosted by better news on the economic front and a plethora of supportive earnings reports. All told, the Dow Jones Industrial Average jumped by 85 points, to close just shy of 13,600, while the Standard and Poor's 500 Index rose to another five-year high, reaching its best level since December of 2007. The tech-heavy NASDAQ, meantime, rose another 18 points, climbing to 3,136 in the process. Gainers easily led losing issues on both the Big Board and the NASDAQ, while new highs for the past 52 weeks swamped new lows. The only discordant note was the fact that the VIX Volatility Index fell back again, easing to 13.57. That is within easy striking distance of a 12-month low at 13.16. Such a reading suggests that this gauge of market sentiment is overly bullish, and that the equity market could be ripe for some profit taking at any time--but probably not just yet.
As to specifics, the market was nicely underpinned yesterday by data showing that initial weekly jobless claims fell back notably in the most recently recorded seven-day stretch, falling by 37,000 to 335,000. That was the lowest level of such filings since January of 2008, when the agonizingly painful recession was just getting under way. This decline in claims was the largest single-week drop in nearly three years and more than reversed several weeks of incremental gains in unemployment filings.
At the same time, the Commerce Department chimed in with a stellar report on housing starts, with that critical gauge of building activity surging to an estimated annualized rate of 954,000 homes in December. That was well above both the expected rate of 887,000 units, and the November level of 851,000 homes. Even more dramatic was the year-to-year estimated gain of 37% from December of 2011. At the same time last year, ground had been broken on an estimated annual level of just 697,000 units. Housing, once a formidable drag on the economy, could well have contributed to GDP growth last year for the first time since 2005.
Then, there is the earnings calendar, which is filling up and heating up. Just this morning, we have heard from Dow-30 component and industrial and financial services giant General Electric (GE – Free GE Stock Report), which chimed in with solid results, and that stock is indicating a modestly higher opening when trading commences in about a half hour from now. It is much the same story for investment banking powerhouse Morgan Stanley (MS), which also reported solid results and is seeing its stock suggesting a higher opening. However, it is a different story for chipmaker Intel (INTC – Free Intel Stock Report), another Dow-30 component. Although earnings here came in several cents a share better than analysts had been forecasting, the company came up a bit shy on the revenue line, and the stock is indicating a lower opening today.
Finally, the news out of China is better, with that fast-charging economic giant seeing its GDP gain a better-than-forecast 7.9% in the final quarter of 2012. That news is helping equities in Europe to post slight gains this morning. Over here, though, the futures are mixed, with some pressure suggested in the tech issues, with shares of Intel, as noted, and Apple (AAPL) indicated to start the day on the downside.
At the time of this article's writing, the author had positions in INTC.