After The Close - The U.S. stock market got off to a strong start this morning and continued to largely build on these gains through the afternoon. Notably, strength in the latter half of the day is always a good indicator as it suggests that the bulls are still in control. At the end of the session, the Dow Jones Industrial Average was up about 128 points (0.8%); The S&P 500 Index ended higher by 21 points (1.3%); and the NASDAQ, which helped lead the broader averages, tacked on 49 points (1.4%). Market breadth was favorable, with advancing stocks ahead of decliners by roughly 2 to 1 on the NYSE. The market sectors all participated in the rally, with some leadership in the industrials names. Further, the consumer issues did quite well. While there was no material weakness in the market today, the defensive issues, such as the utilities and healthcare names, lagged a bit.
Technically, the S&P 500 Index may be looking to break out into higher ground, as today’s advance puts it above the critical 1,700 level. This mark, which corresponds to a large round number, may carry some “psychological” significance, particularly with retail investors who tend to follow the media closely. From here, we will have to see if the market can maintain an upward thrust, or if further consolidation will be necessary. Notably, stocks moved lower and sideways for a few weeks, after approaching these levels in late July. The VIX was lower to just under 13 today, suggesting bullish sentiment persists.
Meanwhile, there were a few encouraging economic reports released this morning. The initial jobless claims for July 27th declined to 326,000, which was quite a bit better than many analysts had expected. Since this follows the encouraging jobs report put out by ADP yesterday, traders may now be betting that the government’s July employment report will be decent. That release is due out before the market opens tomorrow. Also, earlier today, the ISM Manufacturing Index for July came in at 55.4, which was better than expected and up from last month’s reading of 50.9. In contrast, construction spending was a bit weak in the month of June.
The earnings reports continue to dominate the headlines, at least for now. We recently heard from Whole Foods (WFM). That stock slipped after the supermarket operator issued a mixed report. Also, things did not go so well for Exxon Mobil (XOM -Free Exxon Mobil Stock Report), as that issue slipped a bit after the oil giant missed expectations. However, investors were happy with the release from Procter & Gamble (PG -Free Procter & Gamble Stock Report) and that stock rallied. -Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:20 PM EDT - Stocks are trading nicely higher today on favorable economic data and the promise of continued support from central banks around the globe. The morning started out with weekly initial unemployment claims dropping to a five-year low, which raised hopes for an upbeat monthly government report tomorrow on nonfarm payrolls. Meantime, the July ISM manufacturing index rose more than expected, to its highest reading since June, 2011. The lone sour note was an unexpected decline in construction spending for June, which was overshadowed by the positive jobs and manufacturing data.
In the backdrop, prospects for a steady flow of highly accommodative monetary policy from the U.S. Federal Reserve, the Bank of England, and the European Central Bank added to the session’s bullish tone. However, worries that such policies may become less indulgent could set in if the economic data keep coming in on the bright side.
At noontime on the East Coast, the Dow Jones Industrial Average is up 122 points and the NASDAQ is 39 points higher. Winners are outpacing losers by a wide margin on the New York Stock Exchange.
Among the stock market’s various sectors, consumer cyclical stocks are having an especially good day, led by shares of online travel agency CTrip.com International (CTRP). The China-focused company easily topped analysts’ earnings views. Shares of priceline.com (PCLN) are up in sympathy. General Motors (GM) stock is also moving higher in a strong consumer group.
Industrial stocks are also doing better than most, with shares of transportation bellwether FedEx (FDX) leading the rally. Financial stocks ahead of the pack, too, with credit card giant MasterCard (MA) making a nice percentage move.
One of the day’s biggest winners is Yelp (YELP). Shares of the online consumer review company surged when it reported a narrower-than-expected loss and predicted higher-than-forecast revenue ahead.
On the down side, shares of Exxon Mobil (XOM - Free Exxon Mobil Stock Report) are the Dow-30’s biggest decliner on the day. The oil giant didn’t live up to profit expectations, mainly owing to weakness in its refining business. The American Depository Receipts of Royal Dutch Shell `B’ (RDSB) are also lower on an earnings shortfall, despite a rise in oil prices resulting from prospects for improved petroleum product demand following the day’s solid economic data.
Elsewhere, the yield on the 10-year Treasury note has risen to 2.675%, from 2.594%, pursuant to the day’s promising business news.
Heading into afternoon trading, stocks remain strong, if a bit off their session highs, ahead of tomorrow’s big jobs report. -Robert Mitkowski
At the time this article was written, the author did not have a position in any of the companies mentioned.
Stocks to Watch from The Survey – Today’s trading will once again be heavily influenced by earnings reports. Many of the releases were positive and have so far garnered warm receptions on Wall Street, helping to push futures nicely higher. Notable advancers include household products giant Procter & Gamble (PG – Free Procter & Gamble Stock Report), Internet company Yelp (YELP), movie producer Dreamworks Animation (DWA), insurer Allstate (ALL), brewer Boston Beer (SAM), television studio CBS Corp. (CBS), chicken producer Pilgrim’s Pride (PPC), and medical supplies company Affymetrix (AFFY).
It was not all good news, of course, and shares of grocer Whole Foods Market (WFM), energy heavyweight Exxon Mobil (XOM – Free Exxon Mobil Stock Report), hotel operator Marriott (MAR), business outsourcing solutions provider Automatic Data Processing (ADP), and solar panel manufacturer SunPower (SPWR) are all down ahead of the bell on disappointing earnings reports. – Matthew E. Spencer
At the time of this article’s writing, the author did not have positions in any of he companies mentioned.
Before The Bell - The Federal Reserve concluded its latest two-day Federal Open Market Committee meeting yesterday afternoon, did the expected, and the stock market essentially yawned. That in a nutshell is what transpired on Wall Street in the latest session. This is not to suggest that there were no short-lived swings of note on the way to this uninspiring market close, as stocks rose early in the session, gave back much of that advance, as investors awaited the Fed's mid-afternoon announcement, and then firmed up shortly after the lead bank's widely anticipated statement was released. But equities backtracked again near the close, as has become the pattern on some recent days. When the final numbers were in, the Dow Jones Industrial Average had lost 21 points; the Standard and Poor's 500 Index had posted a flattish reading, losing a quarter of a point; and the recently strong NASDAQ rose another 10 points. Gainers, moreover, led losers on both the Big Board and the NASDAQ, and by appreciable margins, suggesting that there is a broadening out of the market's advance.
Of course, there were other influences throughout the day, as the Commerce Department reported that the nation's gross domestic product had gained a much better-than forecast 1.7% during the second quarter, and that the opening-period GDP estimate was scaled back from 1.8% to 1.1%. Of note, many economists had been pessimistically suggesting that second-quarter GDP would rise by just about one percent, while a few pundits had estimated that the expansion rate would be just half that large, or even less. The big surprise in the period was that the much-feared government austerity undertakings had a less profound impact on the business upturn than was initially estimated. Going forward, there is now the expectation that GDP will rise 2%, or so, in the third and fourth quarters, before gaining some additional traction in 2014.
Elsewhere, there was the usual spate of quarterly profit reports, including some outperformances and a few notable profit misses, as reporting season continues to roll on, in what must generally be regarded as a reasonably successful overall performance. The rather positive revenue and earnings results have been instrumental in keeping the bull market going strong in recent weeks. In this regard, the Dow actually hit an intraday all-time high yesterday afternoon, while the S&P 500 Index again neared the thus far elusive 1,700 mark, before falling back once more.
As to the Fed, there was no specific mention of any prospective slowdown in asset purchases, with that widely popular program still in place. Expectations, in part fueled by previous Fed statements, suggest that such a tapering in bond buying may well start in the latter stages of this year. Our sense is that the bank will move slowly in this direction, so as not to upset the investment applecart.
Now, however, a new day dawns, and the momentum overnight and early this morning has shifted dramatically to the bullish side. Of note, the markets in Asia were nicely higher, with Japan's Nikkei 225 gaining 2.5% overnight, in an extension of the week's sharp swings. The other markets in Asia also rose, but less decidedly so. Moreover, the European bourses are likewise higher, with the broadly positive momentum likely the result of the absence of any mention by the U.S. Fed of any detailed schedule for tapering down its bond-buying efforts. Also, yesterday's better-than-expected GDP reading may also be relieving some concerns about growth here. However, later this morning, the Institute for Supply Management will issue its monthly report on manufacturing activity across the country. A modestly expansionary reading is the expectation.
Given this backdrop, it is not too surprising that our futures are sprinting ahead at this hour, with the S&P futures better by 13 points and the NASDAQ futures in the black by almost 20 points. Thus, when trading commences in less than an hour from now, it should do so nicely to the up side, with a possible successful attempt by the S&P to crack the 1,700 mark perhaps to follow. 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.