After The Close -Stocks rose broadly today, although the Dow Jones Industrial Average edged lower because of a weak performance by IBM (IBM - Free IBM Stock Report). On the first day of trading in two-and-a-half weeks with the government back in operation and the threat of an immediate debt default off the table, investors focused on the swarm of earnings reports coming from major corporations. For the session, the Dow was off two points, but the NASDAQ gained 24 points. Winners topped losers on the New York Stock Exchange by better than a four-to-one margin, pointing to underlying strength.
At the sector level, basic materials stocks, led by gold producers, such as Newmont Mining (NEM), were among the strongest performers. Gold prices rose $37 an ounce in NYMEX trading. The consumer noncyclical sector also did better than most, as did the telecom group, spearheaded by Dow-30 component Verizon Communications (VZ - Free Verizon Communications Stock Report). Verizon posted better-than-projected third quarter earnings and revenues.
On the down side, the technology sector lagged, owing to IBM not living up to revenue expectation. The tech bellwether reported a sharp falloff in business in China, and its shares fell to a two-year low. Shares of ebay (EBAY) were also weak, after the online retailer offered up a discouraging outlook for the upcoming holidays.
Energy stocks were held back, too, by about a $1.60-a-barrel drop in oil prices, to around $100.60. Oil prices had been higher over the summer and into early fall, but indications that global economic growth is not proceeding at quite the pace expected earlier appear to be pressuring crude oil quotations.
Meanwhile, the day’s economic news was mixed, with weekly initial unemployment claims falling by 15,000, but there was a drop—if less than expected--in the October Philadelphia Fed Survey reading from September. The unemployment data is still being skewed by problems arising from computer system upgrades in California, though.
On the whole, it was a constructive session, with the uncertainties of the past few weeks over the squabbles in Washington almost seeming like a bad dream. Thankfully, Congress was able to avert a default on the nation’s debt at the last minute, after cooler heads prevailed. It was no coincidence that Warren Buffett, perhaps the nation’s most respected businessman, spoke up earlier this week and pointed out the folly of having the government not paying its bills.
Tomorrow, the focus should continue to be on the profit reports coming from Corporate America. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:30 PM EST -The U.S. stock market opened lower this morning, then partially reversed direction, and is now firming up. Traders are, no doubt, relieved that the situation in Washington has improved, and that progress has been made on some key fronts. It will be interesting to see if the bulls can keep up their efforts through the afternoon. At past noon in New York, the Dow Jones Industrial Average is still off 46 points; but the broader S&P 500 Index is up six points; and the NASDAQ, which is showing leadership again, is higher by 16 points.
Most of the market sectors are in positive territory today. Further, some pockets of strength may encourage the bulls, and help move the market higher. Specifically, the basic materials stocks are showing some leadership, with some buying in the metals and mining names. Notably, the price of gold is up about 3%, and that may be behind the move. The consumer issues are also doing well today. Meanwhile, the energy stocks are lagging, as the price of crude oil is trading a bit lower. The technology sector is also down, but this is largely due to weakness in the computer services area, as IBM (IBM -Free IBM Stock Report) issued disappointing results and the stock is off sharply, thus notably contributing to the Dow’s weakness.
Technically, the S&P 500 Index may well be following through on yesterday’s gain. Assuming we move higher from here, the index will soon be testing its 52-week high located at about 1,730. This area may present some resistance, and a few attempts may be needed before traders can move the market past this level. Meanwhile, the VIX, which dipped sharply yesterday, is about 11% lower again, to about 13 today.
Traders received one notable economic report this morning. Specifically, the initial jobless claims for the week ended Oct. 12th fell to 358,000, down from last week’s slightly revised 373,000 figure, but higher than had been widely anticipated. With the situation in Washington now stabilized, we should be seeing regular economic reports. This should be a relief to traders, always looking for new information.
Meanwhile, the third-quarter earnings season is steadily ramping up. Among the big names that reported yesterday and today, investors received mixed results from Goldman Sachs (GS - Free Goldman Sachs Stock Report) and that issue is trading lower. IBM stock, as noted, is also faltering on a weaker-than-anticipated top-line showing. But, things are going better for American Express (AXP - Free American Express Stock Report) as that company put out healthy results, and that stock is now gaining. - 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 earnings floodgates are now wide open. Notable stocks holding even or moving higher in the premarket on earnings news include financial services company American Express (AXP – Free American Express Stock Report), telecommunications powerhouse Verizon (VZ – Free Verizon Stock Report), grocer SUPERVALU (SVU), recreational vehicle maker Winnebago (WGO), and flash memory manufacturer SanDisk (SNDK). However, investors took issue with a number of reports from high profile companies, including technology giant International Business Machines (IBM – Free IBM Stock Report), investment bank Goldman Sachs (GS – Free Goldman Sachs Stock Report), health insurer UnitedHealth Group (UNH – Free UnitedHealth Stock Report), tobacco company Philip Morris International (PM), and online auctioneer eBay (EBAY). All of these stocks are indicating lower openings this morning, with shares of EBAY and IBM showing the most weakness. – 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 - "What a difference a day makes," to use the title of the hit that was popularized by songstress Dinah Washington more than half a century ago, a song that might well describe the shifting mood on Wall Street in a period of just 24 hours.
To wit, near the close of trading on Tuesday, all the sellers were out, emboldened, apparently, by a failure of the contending parties in the nation's Capitol to reach a deal that would both re-open the partially shuttered government and raise the debt ceiling. Such an accord would sidestep a potential default on the country's $16.7 trillion debt. Indeed, the Republican-led House of Representatives had not yet given any indication that it was open to a bipartisan effort to get the ball moving, as the Senate had suggested that it might well do. Then things started to change as finally, the lower chamber signaled that it would at least vote on the Senate bill, which it had not suggested earlier. So, the bulls widely assumed that an agreement would be passed.
As such, when the market opened yesterday, the buyers were out in force and stayed there all day, in the process helping to drive the Dow Jones Industrial Average up 206 points, which was the session high, while the NASDAQ tacked on a formidable 45 points. Now, as the day closed, all eyes were on the House, as that body prepared to vote on the seeming Senate accord. Of course, the House had been the stumbling block right along, but even the promise to let the bill come to a vote was a clear victory for those seeking a compromise, and traders were largely unified in expecting an up vote. And, they were not disappointed as the House did, in fact, vote last night to pass the short-term funding bill that will allow the government to fully re-open and permit the Treasury to raise the debt ceiling. (The Senate had given its stamp of approval hours earlier.) Failure on this latter count would most assuredly have jeopardized the nation's credit rating as well as produced a default. In short, it would have been catastrophic.
Now, with this headache, which had dominated the headlines for weeks out of the way until early 2014, investors can go back to thinking about the investment fundamentals--namely the economy, earnings, and the Federal Reserve. Here, the business outlook has softened incrementally in recent weeks, according to the Beige Book, a survey issued yesterday afternoon by the Fed for use at its upcoming FOMC meeting. And the hurt is not yet over, as it is likely the coming weeks will take a further toll on the economy, if a progressively lesser one. As to earnings, they are coming out en masse, and they are mixed, as many companies are again meeting, or narrowly exceeding lowered quarterly profit targets and issuing uneven profit guidance. As for Fed policies, the aforementioned FOMC meeting is unlikely to produce an adjustment in the highly accommodative central bank monetary policies just yet, in part because of the economic uncertainties engendered by the now-ending partial government shutdown.
So, for a few weeks, at least, it would seem to be back to business as usual. However, due to the short-term nature of the accord, and the contentious feelings in Washington, it could well be deja vu all over again come early next year. Little is easy on Capitol Hill nowadays, and there is little to suggest that things will change in three months or so. Our thinking is that the next go around in mid-January and early February, respectively, will not be quite as dramatic, but the angry rhetoric still will be heard in Congress, on the cable TV channels, and on the radio.
Now, looking forward, we see that Asia was not impressed by the government finally doing its job, as the leading averages were generally lower overnight; the same situation now prevails among the European bourses. While on our shores, we may be getting a little of buy on the rumor, sell on the news this morning, as the equity futures are now suggesting a modestly lower opening when the trading day commences in less than an hour from now.
Finally, there is earnings season to now contend with and several Dow heavyweights have reported their results in the past 24 hours, among them American Express (AXP - Free Amex Stock Report), which posted in-line results and that stock is suggesting little movement at the open, and new addition Goldman Sachs (GS - Free Goldman Sachs Stock Report), with that investment-banking behemoth noting a revenue shortfall and seeing its stock indicating a lower opening. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.