After The Close - Wall Street got back to its winning ways today after a hiccup yesterday on mixed earnings news. At the close of the session, the Dow Jones Industrial Average was 96 points higher and the NASDAQ had tacked on 22 points. The gains were broadly inclusive, spreading to transportation issues, such as FedEx (FDX) and small-cap stocks, as evidenced by a nice rise in the Russell 2000. Market breath was modestly to the good, with advancers topping decliners by a four-to-three margin on the Big Board.
In truth, it was a day when the stars seemed to align for stock investors. A promising manufacturing reading out of China provided a solid backdrop at the opening bell. Sentiment was then bolstered by upbeat global results from Ford Motor (F). At that point, the positive tone to trading was essentially set, with the view that broad economic growth was in evidence.
Moreover, the feeling that the Federal Reserve will continue to be supportive with respect to its bond purchases is once again providing a tailwind. The impairment to the economy caused by the government shutdown earlier this month holds out the promise of further monetary support by the Fed, possibly into 2014. That prospect, in turn, has helped push both down bond yields and mortgage rates. Government agency Freddie Mac today reported that the average 30-year mortgage rate fell to a four-month low, to a very affordable 4.13%. The improved setting on this front seemed to help housing-related stocks, such as Home Depot (HD -Free Home Depot Stock Report). Shares of the building supply chain were among the Dow’s pacesetters.
Another underpinning for the market is falling gasoline prices. AAA Travel reports that the national average for a gallon of regular gasoline is now $3.33, down from $3.46 a month ago and $3.63 a year earlier. Crude oil inventories in the United States have been climbing for five straight weeks and tensions in the Middle East have temporarily come off the boiling point, pushing fuel prices lower. That increases the chances that consumers will have more discretionary cash to spend over the holiday season.
It was no surprise, then, that consumer cyclical stocks led today’s rally. With the focus on growth, defensive sectors, such as consumer staples and utilities, lagged.
Another individual issue that stood out was Dow-30 component Visa (V), which hiked its dividend 21%.
Tomorrow brings the next wave of earnings reports to close the week. -Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:45 PM EST -The U.S. stock market opened higher this morning, and is now extending its gains. In the early afternoon in New York, the Dow Jones Industrial Average is up 82 points; the S&P 500 Index is higher by four points; and the NASDAQ is tacking on 20 points. The tone is favorable today, but not overly so, as advancing issues are just moderately ahead of decliners on both the NYSE and the NASDAQ. However, almost all of the market sectors are in positive territory, which is encouraging. There are notable advances in the consumer cyclical names. The industrial issues are ahead nicely, for example. Also, the basic materials stocks are making strides after a setback yesterday. Notably, this important sector has been relatively strong over the past few days, after being battered earlier this year. This could be due to an improving materials outlook in China and in other emerging economies. In contrast, the high-yielding utility issues, which were popular yesterday, are weak today, as investors, feeling a bit more bullish, may be chasing the more exciting areas of the market.
Technically, the S&P 500 Index declined yesterday. Moreover, trading volumes were somewhat heavy, which calls for some attention. With today’s advance, the broad index is now just above the 1,750 mark. It remains to be seen if this area will present some resistance. For now, the VIX is a bit lower, suggesting a more bullish tone.
Traders received a few economic reports this morning. However, as was the case yesterday, these issuances are probably not responsible for today’s move up. Specifically, initial jobless claims for the week ended October 19th came in at 350,000, which was higher than had been widely anticipated, but still an improvement over the prior week’s figure. Also, the nation’s trade gap came in at $38.8 billion in August, which was in line with expectations, and quite close to July’s reading.
For now, traders are taking their cue from the numerous corporate reports being released. As long as companies are beating expectations, even lowered targets, and raising their guidance, the market may move higher, at least for a while. No doubt, stocks are trading at elevated price-to-earnings multiples, so the bar is set a bit high. Some widely held names reported today. Shares of 3M (MMM - Free 3M Stock Report) are up slightly. The diversified company largely met expectations, but some investors may be concerned about the outlook. Dow Chemical (DOW) is trading lower, as investors were disappointed with that company’s report. Things are going well for Ford (F), meantime, as the automaker’s results show progress and the outlook is encouraging. - 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 drumbeat of earnings news continues, with a number of high-profile companies reporting third-quarter results. Investors appeared pleased with releases from automaker Ford (F), diversified manufacturer 3M (MMM – Free 3M Stock Report), homebuilder Pulte Group (PHM), airline operator Southwest (LUV), generator manufacturer Generac Holdings (GNRC), and restaurant operator The Cheesecake Factory (CAKE), as all of those stocks are indicating higher openings this morning. Conversely, investors seemed to take issue with reports from telecommunications company AT&T (T – Free AT&T Stock Report), office equipment manufacturer Xerox (XRX), household products maker Colgate-Palmolive (CL), apparel company Under Armour (UA), chemicals company Dow (DOW), and software developer Symantec (SYMC), all of which are trading lower ahead of the bell.
In other news, printing company Consolidated Graphics (CGX) has agreed to be acquired by industry peer R.R. Donnelley (RRD) for roughly $620 million in cash and stock. – 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 - Perhaps it is appropriate that the World Series began last night, as a hit-and-miss pattern has been in evidence on Wall Street thus far this week. First, the stock market could not decide whether it was swinging or not on Monday. So, the leading averages did little more than mark time, barely edging off dead center. Then, a healthy rally ensued on Tuesday, although some late selling prevented the day from hitting a home run. But doubles and triples abounded. But it was a different story yesterday, as a few weak earnings reports, highlighted by disquieting metrics from earth-moving giant and Dow-30 component Caterpillar (CAT – Free Caterpillar Stock Report), led to a succession of swings and misses.
By the close, a series of attempts to fend off the sellers had failed and the market closed with moderate losses, including a 54-point drop in the Dow Jones Industrial Average and a 22-point decline by the tech-heavy NASDAQ, with the latter setback largely fueled by weakness in the semiconductor-related area. The energy group also was somewhat weaker yesterday, on falling oil prices, which were affected by an inventory build. The metals and mining companies and the basic materials group, which had perked up nicely on Tuesday, fell back yesterday, once more assuming its long-held bearish glow. Encouragingly, however, there was no panic unloading of stocks, and the bull market continues fully intact.
Of course, earnings were not all that the bulls were uneasy about. There also were concerns out of China, where the world's second largest economy saw money rates climb yesterday on just the suggestion that inflation could well be headed higher. So, in addition to a less-than-welcoming series of quarterly profit reports, global economic concerns were in the forefront once again, after a hiatus of several weeks, and the overseas markets stepped on the brakes. All of this took place against a backdrop of very few economic reports. That is due to change today, however, as we are scheduled to get data on September new home sales at 10 AM (EDT), one of the reports, which had been delayed by the recent government shutdown. A modest increase is the general forecast in that series. On Monday, the National Association of Realtors, a private trade group, had reported a slight drop in sales of existing homes. The earlier uptick in mortgage rates, which has since reversed, with borrowing costs now at a four-month low, seems to have had little effect on this recovering sector. All told, while some research now suggests the housing market is cooling off a little, and thus not in danger of creating an unwanted bubble, prices continue to rise across most regions and categories.
Elsewhere, the focus is likely to again be on earnings, as a number of large corporate players and some smaller ones are scheduled to release their quarterly metrics today, with some having already done so and with many others due to issue their figures after the market closes this afternoon. In this latter camp is software giant and Dow-30 mainstay Microsoft (MSFT – Free Microsoft Stock Report). One company that has reported this morning and which surprised to the upside is venerable automaker Ford (F). That stock is gaining in the pre-market in response. Peak earnings season, as is the case with the fall foliage in certain northern locales, is now in progress and will be so for a week or two longer.
As noted, the market should again be dominated by quarterly earnings both today and tomorrow, unless the new home sales report is a game changer, which we do not expect, or tomorrow's survey on the volatile durable goods series varies materially from the consensus forecast increase of 4.0%. Absent such surprises, or a major change in direction on the profit front, the stock market seems ready to resume its winning ways this morning, following gains in Europe thus far today. Specifically, the Standard and Poor's 500 index futures are ahead by almost six points and the NASDAQ futures are in the black to the tune of better than eight points with less than an 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.