After The Close - It was a rollercoaster week on Wall Street for those long equities. Indeed, the major U.S. equity Indexes seesawed back and forth during the five-day stretch, with the gyrations pronounced at times. In the end, the bears held the advantage. For the five-day span, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 were 2.1%, 2.7%, and 2.1% points lower, respectively. This week, a number of factors contributed the elevated volatility on Wall Street, including concerns about the economy, both here and abroad, some disconcerting quarterly reports from Corporate America, and worries that China’s economy is slowing.
Still, the final day of the trading week was upbeat. The S&P 500 Index and the NASDAQ finished strongly in positive territory and near their respective highs, while the Dow Jones Industrial Average, which was weaker for much of the session, rallied to finish nominally higher by the closing bell. The index of 30 bellwether companies was weighed down by weak showings from the stocks of International Business Machines (IBM - Free IBM Stock Report) and McDonald’s (MCD - Free McDonald's Stock Report). IBM shares, which represent the largest weighting in the Dow 30, fell sharply after the technology giant missed on both the top and bottom lines in the latest quarter. Sales growth was also the main problem for the fast-food giant. Another Dow-30 component that fell on quarterly results today was General Electric (GE - Free General Electric Stock Report). The diversified industrial giant posted solid first-quarter results, but cut its profit outlook on concerns about its European operations.
However, there was some positive news on the Dow-30 companies today. The stock of Microsoft (MSFT - Free Microsoft Stock Report) rose after the software behemoth posted better-than-expected earnings after the close of trading yesterday. Meantime, reports surfaced this afternoon that the Federal Aviation Administration has approved aerospace giant Boeing’s (BA - Free Boeing Stock Report) plans to fix the 787 Dreamliner’s batteries, a decision that could allow the planes to return to service within weeks. The aircraft has been grounded for several months after battery failures earlier in the year. Boeing is scheduled to report quarterly results next Wednesday.
All of the 10 major sectors, with the exception of the aforementioned technology stocks, finished in the plus column. Not surprisingly, given the results from IBM, the technology sector was an underperformer. However, the basic materials and energy stocks, which have been notably weaker the last few weeks, were generally higher in today’s session. Healthcare stocks also were up sharply. With the basic materials space, the paper products and the containers and packaging issues were up sharply. Meantime, nearly all of the categories in the consumer discretionary sector were notably higher, with leadership shown by media and retail specialty stocks.
Looking ahead to next week, we would not be surprised if the trading volatility continued, as investors will be greeted with a heavy dose of both earnings and economic news. On the earnings beat, 10 more Dow 30 companies, including energy giants Exxon Mobil (XOM - Free Exxon Stock Report) and Chevron (CVX - Free Chevron Stock Report) are scheduled to release their latest quarterly results. The investment community’s attention will also be on technology behemoth Apple (AAPL), which will report fiscal second-quarter results after the close of trading on Tuesday. Apple stock fell to a 52-week low this week. Thus far, the reporting season has delivered a fair share of bottom-line beats, while revenue figures have proven to be more of a mixed bag.
Meanwhile, on the economic front, the investment community’s focus will be on the housing market early in the week with data on existing and new home sales on Monday and Tuesday, respectively. The week will also bring a report on durable goods orders (Wednesday) before the much-anticipated initial reading on first-quarter GDP next Friday. Our sense is all of this information will make for another volatile week of trading on Wall Street. The S&P 500 Volatility Index (or VIX) jumped nearly 25% this week. -
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 put in a somewhat mixed session this morning, due largely to a weak showing by a couple of Dow members. However, the market is pressing ahead strongly. Indeed, at just past noon in New York (EDT), the Dow Jones Industrial Average, which had been weak earlier, is off just five points; the broader S&P 500 Index is ahead 13 points (0.8%); and the NASDAQ, which is showing leadership, is tacking on 42 points (1.3%). Market breadth is decidedly favorable, as advancing stocks are outnumbering decliners by almost 3 to 1 on the NYSE.
Most of the major market sectors are now making gains. The healthcare sector is up sharply. There is also strength in certain capital goods stocks, and in the consumer non-cyclical names. In contrast, the conglomerates are off sharply; the energy sector is lagging other areas; and there again is weakness in the basic materials.
Technically, the S&P 500 is trading near its 50-day moving average, located at 1,544. If this key support level holds, the market may well move higher. For now, investor sentiment seems to be turning bullish again, as the VIX is lower by about 13%, to just over 15.
Meanwhile, there was no economic news today to influence investors. Next week, the housing market will be back on center stage. On Monday, we get a look at existing home sales for the month of March, and on Tuesday, we will receive the FHFA’s Housing Price Index for February, as well as the new home sales figures for March. Given recent signs of a recovery in the real estate sector, these reports, if favorable, might help the bullish case.
The first-quarter earnings season is in full swing. Today, we heard from several big names, a few of which are Dow components. Shares of International Business Machines (IBM - Free IBM Stock Report) are trading lower, after the company put out weaker-than-expected top-and-bottom line figures. General Electric (GE - Free General Electric Stock Report) put out a mixed release and issued cautious guidance, sending that issue lower, too. Further, investors were a bit disappointed with the news from McDonald's (MCD - Free McDonald's Stock Report). However, things went a bit better at Microsoft (MSFT - Free Microsoft Stock Report) as that issue is gaining on a decent report. While not in the Dow, Google (GOOG) a technology leader is seeing its stock trade sharply higher on a solid report, too.
Elsewhere, Vertex Pharmaceuticals (VRTX) stock is surging about 60% on drug related news, while Dell (DELL) shares are lower, as Blackstone (BX) is dropping its bid to buy the company. -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– Earnings season is in full swing, and investors are poring over several reports from bellwether companies, including four members of the Dow 30. After the market closed yesterday, two of the index’s technology components, International Business Machines (IBM – Free IBM Stock Report) and Microsoft (MSFT – Free Microsoft Stock Report) released March-quarter results that received contrasting receptions. Investors appeared fairly pleased with Microsoft’s performance and are bidding its stock higher in the premarket. (Separately, the software giant said its CFO, Peter Klein, will step down at the end of June.) However, IBM’s sales and earnings failed to meet expectations, and the stock is down notably ahead of the bell as a result. Additionally, this morning brought quarterly reports from restaurant operator McDonald’s (MCD – Free McDonald’s Stock Report) and diversified manufacturer General Electric (GE – Free GE Stock Report), neither of which seemed to impress investors. Consequently, both stocks are trading lower in the premarket.
Elsewhere, a number of equities are indicating higher openings this morning on earnings news, including internet giant Google (GOOG), oil field services providers Schlumberger (SLB) and Baker Hughes (BHI), restaurant chain Chipotle Mexican Grill (CMG), and diversified manufacturer Honeywell (HON). Still, no one is happier this morning than investors in Vertex Pharmaceuticals (VRTX). Indeed, shares of the biotech company are soaring some 60% in the premarket due to positive data related to one of its treatments for cystic fibrosis. – 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 - Stocks fell back yesterday for a third time in the past four sessions, and even with a likely firmer opening in the equity market this morning, as the Standard and Poor's 500 Index futures are up by five points, with less than an hour to go before the start of the trading day, and the NASDAQ futures are ahead by 11 points, the week shapes up as the worst in almost a year.
Once again, yesterday, the story was concerns about the economic and political situation in Europe and worries about a deceleration in economic growth on these shores, as well as in China that spooked the markets, sending most equity groups lower on the day. All told, the Dow Jones Industrial Average dropped 81 points, while the tech-heavy NASDAQ shed 38 points.
To wit, in recent days we have seen uninspired metrics on industrial production and factory usage, where the manufacturing sector in each category has fallen back somewhat, although the overall indexes have inched ahead. Also, yesterday, we saw a slight uptick in weekly jobless claims and a modest easing in the Index of Leading Indicators. Such surveys, along with some discouraging data on retail spending and consumer sentiment, have shaken the confidence of the bulls. And in China, economic figures showing that the world's second largest economy had put in a weaker performance during the first quarter than had been forecast, also shook many investors and traders worldwide. In Europe, recessions seem to be spreading; the political outcome in Italy is still unclear; and the International Monetary Fund has trimmed its global growth forecast.
Not only have stocks fallen in recent days, but so, too, has oil and gold, with the latter sinking below $1,400 an ounce earlier this week, while oil dropped below $88 a barrel in New York. Other commodities have seen pressure on their prices as well, and the shares of a number of industrial companies on our exchanges have seen outsized losses.
In truth, the stock market had gotten a bit ahead of itself, and the setback over the last few days probably has been constructive as a mechanism to get some of the froth out of equities, painful, though, it has been.
Then, there is earnings. Here, as well, the news has been spotty and uneven. Although most of the companies reporting so far have beaten lowered expectations, there have been some notable exceptions, most recently IBM (IBM – Free IBM Stock Report), which reported after the market closed yesterday, and came in with earnings that exceeded those of the prior year, but were shy of estimates. Also, that iconic tech stalwart and member of the Dow-30, missed on the revenue line due to softness in the mainframe and software businesses. IBM shares are pointing notably lower in the pre-market, suggesting an opening about nine points below yesterday's $207.15-a-share close.
But the big tech loser this week has been Apple (AAPL), which had broken through its 52-week low of $419 a share on Wednesday, and fell further, to a close of $392.05 a share, yesterday. Apple shares are currently suggesting a flat-to-slightly lower opening this morning.
As noted, though, the futures are headed higher, albeit less aggressively so than earlier this morning, so we could get a modest early bounce this morning. We shall see what goes on from there. Stay tuned. Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.