After The Close - Wall Street was on the defensive for much of today, but the session wasn’t a washout, and the damage was largely limited to some high-profile stocks. Disappointing corporate sales and earnings reports were behind the choppiness. At the end of the day, the Dow Jones Industrial Average finished down 65 points, although the tech-heavy NASDAQ managed a slim, four point gain. As for the broader market, gainers topped decliners on the New York Stock Exchange, which pointed to the mixed tone to trading.
For the record, the morning’s economic data pertaining to the job market and inflation were largely on target with projections. But the muted market backdrop was established early on when Best Buy (BBY) reported a slide in holiday sales, even after hefty discounting, and reduced its outlook going forward. Shares of the electronics retailer plummeted on the news.
The stock of railroader CSX (CSX) also tumbled on weaker prospects for its once mainstay coal business.
Then, too, Citigroup (C) shares were off moderately, after the bank turned in weaker-than-anticipated revenue and profits for the fourth quarter.
Shares of Dow-30 component United Healthcare (UNH -Free United Healthcare Stock Report) headed south, as well, following disappointing profit guidance.
On the plus side, the stock of BlackRock Inc. (BLK) rose after the money manager beat earnings expectations by a wide margin and raised its quarterly dividend. The company is the nation’s largest provider of exchange-traded funds, and is benefiting from rising interest in ETFs.
Elsewhere among financial stocks, regional bank PNC Financial (PNC) reported a jump in December-quarter profits arising from better credit quality and loan growth. Its shares moved higher as a result. But Goldman Sachs (GS - Free Goldman Sachs Stock Report), another Dow Jones Industrial Average component, saw its shares pull back following a drop in earnings, even though the investment bank topped analysts’ bottom-line estimates. Weak fixed-income trading results may have affected sentiment.
A big winner today was CEC Entertainment (CEC), which is being bought by a private equity firm for $54 a share in cash. CEC owns the popular Chuck E. Cheese pizza restaurants.
Tomorrow brings another round of earnings and economic news that may meet with better reception from investors. The bullish line of thinking is that today was only a bump in the road, but the bears still feel the market is overbought and in need of a correction. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:40 PM EST - The stock market is trading modestly lower today, following two strong days. At just past noon in New York, the Dow Jones Industrial Average is off 70 points; the broader S&P 500 Index is down four points; and the technology-heavy NASDAQ is off just a point. Market breadth also suggests a mixed tone to the session, as declining issues are just ahead of advancers on the NYSE. Further, many market sectors are losing ground, with losses in the financial stocks. The consumer names are also weak, with sluggishness in the retailers. Notably, this group is important to watch, as retail activity plays a major role in the broad economy. Certainly, disappointing reports and guidance by key companies in this industry have not helped matters lately. Meanwhile, the basic materials sector is advancing, with some of the metals issues doing well. After having underperformed for some time, these stocks may now look appealing to investors. The healthcare names, too, are showing leadership today, thanks to strong moves in the biotechnology sector.
Technically, after a brief, but impressive, two-day rally, the stock market seems to be in a better position. However, it remains to be seen if the bulls can follow through from here. Sentiment has not changed too much today, as the VIX is up just slightly.
Meantime, investors looked past some decent economic news this morning. Specifically, initial jobless claims came in at 326,000 for the week ended January 11th, which was lower than had been anticipated. While this would appear to be good news, a better showing here may have some concerned that the economy is recovering too quickly, and will prompt the Fed to act. Further, consumer prices rose slightly in December, but more or less, matched expectations. Also, the Philadelphia Fed put out a decent report on activity in that region. Meanwhile, the NAHB Housing Market Index dipped a bit in January, and that may be hurting the home building stocks today.
In corporate news, the earnings reports are now coming out with some regularity. In the financial area, we received positive reports from Goldman Sachs (GS – Free Goldman Sachs Stock Report) and BlackRock (BLK) while Citigroup (C) release was less impressive. In retail, Best Buy (BBY) stock is sharply lower, after that company put out disappointing guidance. -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 calendar is heating up, led by financial institutions. Indeed, Goldman Sachs (GS – Free Goldman Sachs Stock Report) and BlackRock (BLK) both reported solid fourth-quarter results. BLK stock garnered a warmer reception on Wall Street, and is up nicely ahead of the bell, while GS shares are up just slightly. Conversely, Citigroup (C) delivered softer-than-expected December-period financials, causing the stock to trade moderately lower in the premarket. Other stocks indicating weaker openings on earnings news include insurer UnitedHealth Group (UNH – Free UnitedHealth Stock Report) and railroad operator CSX Corp. (CSX). The biggest disappointment, however, came from Best Buy (BBY). The electronics retailer reported a decline in comparable-store sales over the holidays and said that aggressive discounting weighed on margins. BBY stock is plunging in pre-market trading, as a result.
In other news, shares of CEC Entertainment (CEC) are up sharply ahead of the bell, after the restaurant operator agreed to be acquired by an affiliate of private-equity firm Apollo Global Management for $54.00 a share in cash. Rumors began circulating last week that the company was on the auction block. – 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 - Chalk up another win for the bulls. Indeed, after succumbing to a bout of profit taking on Monday, in which the 30-stock Dow Jones Industrial Average had plunged 179 points, and some of the bears had been forecasting even bigger things up ahead, the bulls have regrouped and driven the markets notably higher for the past two sessions, with that blue chip composite rising 116 and 108 points, respectively. In the process, the broadly configured Standard and Poor's 500 Index briefly soared to another all-time high of just past 1,850, before settling in to close up 10 points, at 1,848. That index has been joined by the S&P Mid-Cap 400 (up eight points) and the small-cap Russell 2000 (also ahead by eight points). The Dow is within a hundred points of a record, meanwhile, but the tech-laden NASDAQ is still close to a thousand points below such a peak.
What has turned around investor opinion in just two days? For one thing, the economic news has been better, following last Friday's disappointing job-creation figures. On point, Tuesday saw data on retail sales issued that showed a solid increase once faltering car sales were backed out, while yesterday, the Labor Department issued a generally benign report on producer price inflation, and the Federal Reserve Bank of New York's report showed that manufacturing activity in the New York region has surged this month. Also in the past 24 hours, the Federal Reserve's Beige Book summation was released and that survey noted that economic activity was continuing to show moderate improvement, overall. Also, even as several Federal Reserve regional bank Presidents were noting that they expected the Fed to continue its monetary tapering, there was also some sense that interest rates, now at historically low levels, would remain there for some time yet, to the relief of most equity investors.
Most important, perhaps, the first of the fourth-quarter earnings reports are starting to come out, and to the relief of the bulls, they are making decent reading, in the main. True, expectations have been dampened by a succession of downward estimate revisions, but even so, the numbers have generally been at, or above, the latest consensus expectations. Specifically, yesterday saw the release of upbeat earnings from banking giant and erstwhile Dow component Bank of America (BAC). That one-time blue chip topped expectations and its profit beat helped to drive gains in the financial sector on the day. Also, carmaker General Motors (GM) indicated that is sees modest 2014 market-share increase and it has declared a $0.30-a-share quarter dividend. That is its first such disbursement since May of 2008.
Going forward, the earnings calendar will really start to heat up over the next fortnight, with a succession of giant corporations reporting their results in the days to come. After the market closes this afternoon, for example, chipmaker and Dow component Intel (INTC - Free Intel Stock Report), and financial services provider and fellow Dow issue, American Express (AXP - Free American Express Report) will issue their latest quarterly metrics and, presumably, accompanying outlooks. Then, tomorrow, industrial behemoth General Electric (GE - Free General Electric Stock Report) will be releasing its results. That will be followed next week by the quarterly reports from no fewer than eight of the 30 Dow components. It should, obviously, be a very busy stretch.
As to the day ahead, it will again be earnings driven, as the bulls try to extend their mini-winning streak, which has seen most of the key indexes start to go positive for the year to date, including the NASDAQ, the S&P 500, and the Russell 2000. The Dow, meanwhile, is now knocking on the door of such a turn, having nicely pared its earlier modest cumulative loss. And as to earnings, Dow component Goldman Sachs (GS - Free Goldman Sachs Stock Report) already has issued its quarterly results and while the giant investment banking house posted lower earnings, it did manage to exceed expectations for the period. The stock is up nominally in early pre-market trading. But it is another story for electronics retailer Best Buy (BBY). That chain posted weaker Christmas season sales and the stock is plunging ahead of the bell, losing close to a third of its value.
Looking at the respective global regions today, we find stocks in Asia were mixed overnight, while equities in Europe have come off of their recent highs. On our shores, the upward charge of the past two sessions, seems to be suggesting some modest profit taking at the open, with the S&P 500 Index futures now off close to four points, as are the NASDAQ futures. - Harvey S. Katz
At the time of this article's writing, the author had positions in INTC.