After the Close - The U.S. equity market, after three straight losing sessions, returned to the plus column today. Investors were able to look past the renewed concerns about the euro zone (more below) and, with no major surprises from the Federal Reserve, showed some renewed interest in U.S. equities. At the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index had added 56, 25, and 10 points, respectively. Overall, advancing issues were comfortably ahead of decliners on both the Big Board and the NASDAQ.
The buying, while far from vigorous, was pretty encompassing, with each of the 10 major groups finishing the session in positive territory. Leadership came from the healthcare, consumer staple, and consumer discretionary sectors. It should also be noted that after a sluggish start, interest in energy stocks picked up, with a likely assist from Federal Reserve commentary released at 2:00 P.M. (EDT). Also, pushing crude oil prices higher was a weekly report from the Energy Department's Energy Information Administration showing that crude supplies declined by 1.3 million barrels (or 0.3%), to 382.7 million barrels.
Speaking of the Federal Reserve, the lead bank said after the conclusion of its latest two-day monetary policy meeting that "a return to moderate economic growth following a pause late last year" is likely. But perhaps what investors were most pleased about was that the central bank noted that it would maintain its current level of monetary stimulus, which includes monthly purchases of $40 billion of mortgage-backed securities and $45 billion of longer-term Treasury securities for some time yet. Historically, a continuation of aggressive monetary policies is viewed positively by equity market participants—and that seemed to be the case again today.
Meantime, the news from the other side of the Atlantic has been far from uplifting these days, with renewed concerns about the sovereign-debt problems for a few of the euro zone’s members. However, the European bourses were able to break their three-day losing streak today (Germany’s DAX and France’s CAC-40 Indexes rose 0.7% and 1.4%, respectively), as investors apparently now believe that policymakers will find a workable solution for Cyprus' bailout problems. After Cyprus’ Parliament rejected a plan to contribute to the nation's bailout package by seizing people's bank savings, one proposal floated by Cypriot officials to find new ways to stave off financial default involved asking Russia for help. In recent days, European stocks had fallen on concerns that Cyprus’ inability to reach a compromise on how to handle its debt problems would complicate matters in other larger European nations (e.g., Spain and Italy) that have their own sovereign-debt issues.
Looking ahead to the remainder of the trading week, the economic news will be concentrated to tomorrow, with reports due on initial weekly unemployment claims and existing home sales. We will also get the latest survey of economic conditions for the greater Philadelphia area. A quiet day is in store for the economy on Friday. Meantime, on the earnings front, we will receive the latest quarterly results from technology giant Oracle (ORCL) after today’s close. Tomorrow, the investment community’s attention turns to the retail sector, with earnings reports due for Nike (NKE), lululemon Athletica (LULU), Perry Ellis (PERY), and rue21 (RUE). We will also get the latest quarterly results from homebuilder KB Home (KBH) less than 24 hours after industry peer Lennar (LEN) delivered strong February-quarter results. - William G. Ferguson
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
12:30 PM EDT - The stock market opened higher this morning and has managed to hold onto most of these gains as we move through the day. At just past noon in New York, the Dow Jones Industrial Average is up 55 points (0.4%); the S&P 500 Index is higher by eight points (0.5%); and the tech-heavy NASDAQ is tacking on 15 points (0.5%). Market breadth suggests that the rally is broadbased, as rising stocks are outnumbering decliners by better than 2 to 1 on the NYSE. There are about 300 stocks hitting new highs, versus only 20 issues making new lows on the NYSE, which suggests that overall the market is still quite strong. Most of the market sectors are pushing higher, with leadership in the healthcare, services, and consumer cyclical issues. There is some weakness in the transportation and energy stocks.
Technically, the S&P 500 is attempting to rebound after a three-day losing streak. Notably, some of the selling was accompanied by higher volumes, and this may be worth noting. The VIX is lower by 12% today bringing this key index back down to 12.6.
Meantime, traders in the United States are shrugging off the situation in Cyprus, at least for now, while the European stock markets are finishing up a generally positive session. The euro is strengthening and now testing the $1.30 area. It is important to watch this currency, as many U.S.-based companies are doing business across the Continent, and a weak euro makes trading difficult.
There were no material economic reports released today. However, traders will be waiting for comments from the Fed, as it wraps up its two-day meeting at approximately 2:15 PM (EDT). Traders will, no doubt, want to hear that the economy is making progress, but that the current round of asset purchases will continue. Meantime, tomorrow will be a busy day for reports. Notably, the employment situation is in the spotlight with the release of the weekly initial and continuing jobless claims. We also get a look at the housing market, as the existing home sales for February are slated to be issued.
In corporate news, FedEx (FDX) stock is trading lower, after the transport giant delivered somewhat weaker-than-hoped for quarterly profits. The news likely explains the weakness in the transportation sector. In technology, Adobe Systems (ADBE) shares headed higher after the media software company announced strong results. In retail, William-Sonoma (WSM) put out a good report, and that issue is advancing. - 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 – There are a few notable earnings reports out today, including one from package delivery giant FedEx (FDX). The company’s February-period earnings were a bit weaker than expected, and management issued disappointing guidance. The stock is down substantially in the premarket as a result. Likewise, shares of packaged food and cereal company General Mills (GIS) are down just slightly ahead of the bell on earnings news. On the bright side, investors appear pleased with quarterly reports from software developer Adobe Systems (ADBE), homebuilder Lennar Corp. (LEN), and kitchen and home-products retailer Williams-Sonoma (WSM), as all three of those issues are indicating higher openings this morning. – 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 - Save for the Dow Jones Industrial Average, which added a nominal four points, the bears managed to run their mini-winning streak to a modest three sessions yesterday, as those perennial pessimists were able to partly sustain a late-session loss and beat back several attempts in the closing minutes to right the suddenly listless ship.
Thus, when all the day's trading was in and the winners and losers were tallied, the final data showed that the Dow Jones Industrial Average, as noted, had inched ahead by a slim four points, while the tech-heavy NASDAQ had dropped nine points and the Standard and Poor's 500 Index had shed nearly four points. Also, losing stocks had beaten back winners to the tune of 17 to 13 on the Big Board and seven to five on the NASDAQ.
Once again, it was the combination of mild profit taking and further concerns about the eroding situation in debt-encumbered Cyprus, the second smallest nation in the beleaguered euro zone, that managed to slightly take the measure of the bulls. It isn't just the worries about the end result of that country's struggle to stay solvent, but rather the unusual remedy that had been suggested to deal with the situation. Specifically, there had been the proposal, since rejected by the Cypriot Parliament, to sanction a tax on bank deposits. What happens next over there depends on the response of the European Central Bank. The ECB has said that it will withdraw Emergency Liquidity Assistance from the country's banks now that the tax on depositors has been rejected.
It isn't just Cyprus and its small economy that have the global markets on edge. It is the other, and far larger troubled nations, such as Italy and Spain, that are on the collective minds investors over here and overseas. Just what remedies will be proposed should those and other nations seek bailouts.
As to our market, it had risen initially on better housing metrics, notably gains in both housing starts and building permits. In fact, at the day's early peak, the Dow Jones Industrial Average had run up by some 60 points; at the session lows, that same 30-stock composite had been in the red by almost 70 points. The late comeback, which for a time had put the Dow back in the win column by almost 30 points, was brought about by signals that the European Central Bank would provide critical support to the troubled banks in Cyprus, even though the controversial tax on deposits had been rejected. It was that kind of a day.
Meanwhile, in somewhat brighter news, the housing market continues to press forward on our shores, as the carnage of the past half-decade, and more, is slowly being overcome. To be sure, we are hardly in a housing boom, but the metrics are at least pointing in the right direction. It would seem as though we are in an orderly advance. And given the consequences of the earlier boom/bust sequence on the aggregate economy, the current upward path, while not all that exciting, is certainly more constructive.
Looking ahead to a new day, the economic calendar for news releases is light, but we will be getting musings from the Federal Reserve later in the day, as the nation's central bank will conclude its two-day FOMC meeting at about 2:15 PM (EDT). No change in monetary policy or major adjustment in the language that the Fed employs to signal future plans are expected at that time.
As to the U.S. markets this morning, they are seemingly set to follow the global markets higher, as the S&P 500 Index futures are ahead by nine points and the NASDAQ futures are better by 23 points with about a half hour to go before the start of the new trading day. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.