After the Close - Stocks fell from the get-go today on rising fears of military action against Syria. The move lower continued the swoon in stocks that started late Monday after hawkish words from U.S. Secretary of State John Kerry. At the end of the day, the Dow Jones Industrial Average had fallen 170 points and the NASDAQ was off 79 points, or proportionately twice as bad as the Dow. Market breadth was extremely negative, with the number of declining issues outpacing gainers by a wide margin.
Even investors hoping for a stay in the tentative toning down of the Federal Reserve’s aggressive bond-buying program found themselves playing a weak hand this morning when data on consumer confidence came in better than expected.
But the day was really all about fear of the unknown. What the consequences of a military strike against Syria might be created uncertainty, and pushed investors into defensive segments of the market, such as gold and utility stocks.
Stocks were probably ripe for a measure of profit-taking, as well. Coming into today’s session, the Dow-30 was up over 14% for the year in less than eight months. Although that was down from the better-than-18% advance at the index’s peak this year, valuations may then have been a bit stretched.
As to be expected, oil prices surged with the prospect of military force in the sensitive Middle East. Even though Syria is not a major oil producer, it is close to other countries where sizable oil production occurs, and fears that supplies could be disrupted are already high with the violence in Egypt and international sanctions on oil from Iran. Oil prices rose over $3 a barrel on the day as a result. If sustained, that advance could soon mean higher gasoline prices on these shores.
Not helping the mood on Wall Street, either, were indications that another battle over raising the debt ceiling might be brewing. The U.S. Treasury has noted that it could run out of cash to pay all of the government’s bills by mid-October. Investors keenly recall the stinging discomfort caused by similar such discord back in the summer of 2011. The disruption that might be created by another contentious struggle over raising the nation’s debt ceiling could hurt the economy and market sentiment.
As for tomorrow, Wall Street may have a hard time focusing on more than the possibility of military action against Syria until that issue is addressed. - Robert Mitkowski
At the time of this writing, the author did not have a position in any of the companies mentioned.
12:30 PM EDT - The U.S. stock market is putting in a weak performance today. Further, at just about noon in New York, the major averages are still near their session lows. The Dow Jones Industrial Average is off 110 points; the broader S&P 500 Index is down 18 points; and the technology heavy NASDAQ, which is doing especially poorly, is shedding 51 points. Market breadth shows widespread selling of equities, as decliners are outnumbering advancers by over 3 to 1 on the NYSE.
All of the market sectors are in negative territory today, with sharp losses in the industrial issues. The basic materials are also weak, despite higher gold prices. Notably, the precious metal is now over $1,400 an ounce, and has as made a considerable advance over the past month, or so. The technology names are also an area of weakness today. In contrast, there is some relative strength in the energy area. This likely reflects higher oil prices. Crude oil is up slightly, to $105 a barrel, on concerns about potential military action against Syria. While that country is a relatively smaller producer, investors may be fearing that problems can develop throughout the region. The ongoing unrest in Egypt does little to help the situation, either. Further, the utilities are also holding up better, which is understandable, as these stocks tend to be defensive and offer high dividend yields.
Technically, the S&P 500 Index tried to move above its 50-day moving average at 1,660 a couple of days ago, but ultimately could not hold that level. Further consolidation may now be necessary, before investors step in and push the market higher in a more meaningful way. The VIX is up about 8% today, suggesting that traders have become a bit more concerned.
Investors did not take too much note of the economic news released this morning. The Conference Board’s Index on Consumer Confidence came in at 81.5 for the month of August, which was quite a bit better than had been expected, and also just above the July figure. The improvement is important as the consumer play an integral role in the broader economy. In the corporate arena, Tiffany (TIF) put out encouraging results and that issue was higher, but has since slipped. -Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.-
10:00 AM EDT - The stock market, which had drifted higher on low volume for much of the day yesterday, suddenly reversed course late in the session and closed modestly lower, with the Dow Jones Industrial Average, a 40-point winner early in the day, ending the session down 64 points.
The primary reason for the late selloff was the prospect of military action against Syria by the West. Skittishness over that prospect, a further rise in oil and gold prices this morning, and an admission by the Treasury Department that it would hit its borrowing limit in mid-October, and thus be unable to pay all of its bills soon thereafter absent a budget deal, are now combining to drag stocks even lower this morning.
Thus, shortly after the start of the trading day in New York, we find that the Dow Jones Industrial Average is already off close to 70 points; the NASDAQ is lower by 30 points; and the Standard and Poor's Mid-Cap 400 Index is off by 11 points.
This weak opening on our shores follows notable declines in Asia overnight and pronounced softness in Europe thus far today. For the moment, at least, the deteriorating situation in Syria is pushing speculation about the Federal Reserve possibly tapering its bond purchases somewhat, although we sense this will not be the case for long. -Harvey Katz
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 – Retailers are in the spotlight today. On the earnings front, jeweler Tiffany & Co. (TIF), watch maker Movado (MOV), and shoe seller DSW (DSW) all impressed investors with their respective July-period results and outlooks. The three stocks are trading higher in the premarket as a result, with MOV shares looking particularly strong. Elsewhere, the stock of J.C. Penney (JCP) is down modestly ahead of the bell, after activist investor William Ackman has decided to sell his entire 18% stake (roughly 39.1 million shares) in the department store operator. After pushing for managerial changes and several years of trying to turn Penney around from his seat on the Board of Directors, Mr. Ackman has decided to cut his losses, as the struggling retailer is still trying to right the ship.
Finally, there is news on the M&A front, as drugmaker Hi-Tech Pharmacal (HITK) has agreed to be acquired by industry peer Akorn for $43.50 a share in cash (or roughly $640 million), a 23.5% premium to the stock’s preannouncement closing price. HITK stock is soaring in pre-market trading 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 - Equities managed to drift modestly higher in half-hearted fashion through much of the day yesterday, before a late-reversal sent the averages tumbling into the red, on what was a very low volume Monday in late August. Specifically, stocks, which had suggested a mildly lower opening until about an hour before the start of the trading day, overcame that early expectation after a disappointing report on orders for durable goods in July was released at 8:30 (EDT) by the U.S. Commerce Department. The late pullback was occasioned by caution about future Federal Reserve policies along with concerns about the worsening situation in Syria, following remarks by Secretary of State Kerry about that nation's use of chemical weapons. But even this late selling was not dramatic, as the Dow Jones Industrial Average, which had at one time swung from an intra-session gain of 40 points, closed off by a still relatively modest 64 points. The Standard and Poor' 500 Index, meanwhile, ended off by seven points, while the tech-laden NASDAQ bucked this lower trend with an essentially unchanged reading. Losing stocks, though, outdid gaining issues on the Big Board.
Meanwhile, for much of the day, it was again a case of bad news being good news on Wall Street. Thus, after the government reported that orders for durable goods--those typically long-lived consumer and business offerings, such as computers, washing machines, and jet aircraft--had plunged by 7.3% last month, which was a materially larger decline than had been forecast, the bulls opted to start buying stocks. The rationale for this upbeat sequence is that weaker metrics, such as the durable goods report, would possible encourage the Federal Reserve to hold off on its earlier indicated intention to pare back its monthly purchases of Treasury bonds and mortgage-backed securities. Some have been speculating that the central bank would begin this tapering effort, which has been very popular with Wall Street, as early as next month. But the weak durable goods report, along with an even more disquieting issuance on new home sales last Friday morning, would seem to lessen the odds for such an early tapering.
The durable goods report, meanwhile, was the lone economic issuance of note yesterday. There also were few corporate stories of any significance, save for Amgen's (AMGN) enriched takeover offer for fellow biotech concern Onyx (ONXX). Both stocks rose on this news, on what was another slow summer Monday, with earnings season long in the rearview mirror, except for a few straggling retailers that are on a different quarter ending period (July) than most other American companies.
As to economic issuances going forward this week, the Conference Board is scheduled to release its monthly survey on consumer confidence this morning. Expectations are that this survey slipped a little from a July reading of 80.3. However, confidence levels are thought to have remained quite high, which would suggest that the business expansion was still on solid footing, notwithstanding the poor durable goods and new home sales reports. Then, after a quiet day on Wednesday, we are due to get the weekly report on jobless claims on Thursday, where a small decline, from 336,000 to 332,000, is the expectation. Thursday also will bring data on revised second-quarter GDP. Initially, that survey had shown that the nation's economy advanced at an annual rate of 1.7% in the April-to-June period. This pending revision, which is based on more complete source data, is forecast to show that GDP gained a more formidable 2.2%. Finally, the last week of August will conclude on Friday morning with reports on personal income and consumer spending for July, with data on manufacturing activity in the greater Chicago area, and a reading on consumer sentiment from the University of Michigan.
So, it should be a moderately busy week, in which, as noted, most investor eyes will be fixed on the Federal Reserve, as the lead bank readies itself for not only its FOMC meeting on September 17th and September 18th, but also prepares to welcome on board a new Chairman following the indicated departure of its two-term leader, Ben S. Bernanke. Speculation on who will succeed Mr. Bernanke is likely to heat up in the coming weeks.
Now, looking ahead to a new day, we find that the markets in Asia overnight were mostly lower, as they are in Europe so far this morning. The impetus for the selling is a further surge in oil prices, to a five-month high. Gold, too, is pressing higher once again. The reason for this rush to oil and gold are fresh concerns about the possibility of military action again Syria, which was called out yesterday, as noted, by Secretary of State John Kerry on its use of chemical weapons. As to our stock market, the early action in the futures suggest a materially lower opening this morning. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.