After The Close - The major equity averages traded in a tight band around breakeven for much of this abbreviated week’s first session. Although the headline figures did not offer much insight to the overall condition of trading, a closer look showed that it was a mixed session on Wall Street. One thing, though, that was not debatable were signs of fatigue among investors after seven straight weeks of gains. The lack of any significant news on either the earnings or the economic fronts did not give traders much to work with and thus we did not see any forceful moves in either direction in a market that is clearly overextended.
As noted, by the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index were little changed. The NASDAQ fared a bit better than the other major indexes, which is not surprising given that the advance/decline data was a bit more supportive on the NASDAQ than it was on the Big Board, where the decliners held a notable lead by the time trading concluded. The NASDAQ was helped by solid showings from the shares of a few of the technology industry’s heavyweights, including Apple (AAPL) and Google (GOOG). Within the technology space, the same could not be said for some of the momentum names like Facebook (FB) and LinkedIn (LNKD). All in all, it still was encouraging to see the Dow 30 and the broader S&P 500 Index hold their respective places above the psychologically significant 16,000 and 1,800 levels on a day when there was little news of note to support the bulls.
From a sector perspective, nearly all of the groups among the top 10 sectors were little changed on the day. However, all but the consumer discretionary and healthcare stocks finished in the red. The day’s biggest laggard was the energy sector. The energy issues were hurt by a sharp drop in oil prices. Crude prices fell sharply after an agreement among world powers aimed at curbing Iran's nuclear program eased tensions in the region and raised the prospect of more oil exports from that country.
Meantime, there was some big news from the retailing sector today, but unlike last week, which saw many of the retailers report October-period results, it was not earnings related. However, it may have been management driven, as retailing titan Wal-Mart (WMT - Free Wal-Mart Stock Report) replaced CEO and President Mike Duke and named Doug McMillon as its new leader. The retailer’s bottom-line growth has cooled some this year and the company was embroiled in a bribery scandal, which may have prompted the leadership change that will become effective on February 1st.
Speaking of retailing stocks, those issues may see some additional action tomorrow following the release of the latest data on consumer confidence at 10:00 A.M. (EST). This report is expected to be closely monitored by investors for clues as to how consumers are feeling ahead of the holiday shopping season, which begins this Friday. We will also get some important data on the housing market when the Commerce Department releases figures on housing starts and building permits for the months of September and October. The September and October figures were delayed by last month’s temporary government shutdown. William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:30 PM EST - The U.S. stock market got off to a somewhat mixed start this morning, but is now pressing higher. As we pass the noon hour in New York, the Dow Jones Industrial Average is ahead 25 points; the broader S&P 500 Index is up one point; and the technology-heavy NASDAQ is adding on six points. Market breadth suggests a mixed tone to the session, as advancing issues are about even with decliners. Further, the major market sectors are putting in an uneven performance, with large gains in the healthcare sector and a strong showing in the consumer area. In contrast, the energy and basic materials issues are underperforming.
Technically, the S&P 500 Index remains just above the 1,800 mark. This area will be important to watch, as it corresponds to a large round number, and may be of psychological importance. As for sentiment, the VIX is up about 3%, to 12.59 today. However, this is still a very low reading, suggesting some complacency on the part of traders. Given that the market has advanced for some time, with little interruption, many traders and retail investors may be wondering if a “bubble” atmosphere is developing. Usually, when this occurs, as it did in the early Internet days, stocks were moving higher, without the backing of any notable fundamentals. Also, at that time, there was a delusional quality to the “Wall Street” crowd, which did not want to see this disconnect. In our view, this is not yet the case in the current situation, where some caution about equity levels has been expressed. Further, the third-quarter earnings season was generally positive, and guidance often has been supportive. However, price to earnings multiples are elevated, dividend yields are low, and capital appreciation is not appealing, and that is of some concern.
Meantime, traders received just one major economic report today. Specifically, pending home sales declined 0.6% for October, coming in just lower than had been expected. Tomorrow, we receive reports on housing starts and building permits, too, and this should provide some insight into the state of the nation’s real estate markets. Meanwhile, internationally, a nuclear deal with Iran may be driving the market higher. That country has agreed to tone down its nuclear program in exchange for an easing of sanctions.
In the corporate arena, there were few notable earnings reports released today. However, some large names, such as Alcoa (AA), are up on analyst upgrades.
At the time of this article’s writing, the author has positions in (AA).
Stocks to Watch from The Survey – Corporate news is quite light at the beginning of this holiday-shortened trading week. However, there are a few notable management shakeups to be aware of. Indeed, Wal-Mart Stores (WMT – Free Wal-Mart Stock Report) has named Doug McMillon, current CEO of Wal-Mart International, as the new CEO of the world’s largest retailer effective February 1, 2014. He will succeed current CEO Mike Duke, who’s retiring, but will stay on for one year to help with the transition. Elsewhere, struggling smartphone maker BlackBerry (BBRY) has tapped new people for the posts of Chief Operating Officer, Chief Marketing Officer, and Chief Financial Officer. WMT shares are up just slightly ahead of the bell, while BBRY stock is showing modest 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 - The last full week of November closed on an upbeat note on Friday, an otherwise somber day that marked the 50th anniversary of the assassination of President John F. Kennedy in Dallas.
All told, the market opened on a mixed note, with the Dow Jones Industrial Average quickly falling back below the 16,000 mark in a very modest wave of selling that brought that blue-chip composite down to just under 15,980. The Standard and Poor's 500 Index followed suit, but the tech-laden NASDAQ, which opened the day higher and never looked back, moved solid ahead on a steady bullish course.
Helping sentiment on this light news day was the absence of any real reason to sell. To wit, earnings season is long in the books, with the exception of the retailers, who typically are on a different quarter-ending calendar. Here, our overall sense is that such data, albeit not electrifying, have not been any worse than expected, and in a number of instances have been much better than forecast. This, too, has helped to underpin the extended bull market.
Also, the economy has managed to easily shake off the early-year impact of the sequestrations and the October chill brought on by the partial government shutdown. All the while, most indicators have continued to paint a reasonably bright economic recovery scenario, without the pressure borne of a frenetic inflation-inducing expansion. That not too hot, not too cold business expansion has been a clear support to the market this year.
That comfortable forward course has allowed the Federal Reserve to continue to liberally pump money into the system in the form of aggressive bond purchases each month. The next test for central-bank policy makers will come on December 17th and 18th when they will hold their year-ending FOMC meeting. In recent days, there has been some speculation that the long-awaited tapering will get under way at that time. However, we have been down that road before and nothing of note has transpired. So from our vantage point, it seems to be an even chance, at most, that the Fed will act at that time. In any case, there is almost no chance that the bank will move away from its historically low interest-rate policies for some time--perhaps not until 2015.
Finally, the equity market is being supported by the almost certain accession of Janet Yellen to lead the central bank in the wake of Ben S. Bernanke's pending exit. Ms. Yellen earlier won approval from the Senate banking Committee, and we could be just days away from an affirmative vote by the full Senate. Her acknowledged dovish views are very popular on Wall Street, and her climb to the top of the proverbial greasy pole, to paraphrase Benjamin Disraeli, would be well received by the investment community. Hence, we could be also getting a little buying on the rumor.
Taken together, all of this is producing an ongoing bull market of historic proportions. On point, the Dow Jones Industrial Average moved further above 16,000 in the latest session, adding 60 points, to end the day at 16,070. The Standard and Poor's 500 Index, not to be left behind added 11 points and closed above 1,800 for the first time, and the NASDAQ, again taking the lead, jumped 27 points to just shy of 4,000. However, this latter climb was not to an all-time high. We still are more than a thousand points from a record on the NASDAQ.
Now, a new day and week commence. And it will be a shortened stretch, with the markets closed on Thursday in observance of Thanksgiving, and open for an abbreviated session on Friday, which is known in the retail trade as "Black Friday.'' In between, we are scheduled to get a key reading on consumer confidence tomorrow. But before then, the markets are bounding ahead overseas, most notably in Europe, where a sense of well being is being expressed following this past weekend's nuclear deal hammered out by U.S. negotiators with Iran. Not surprisingly, oil futures are weakening and gold is falling further as international tensions should now presumably ease somewhat. And over on our shores, the markets appear ready to start the week nicely higher, with the S&P 500 Index futures ahead by almost seven points and the NASDAQ futures are some 13 points to the good. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.