After The Close - Unlike the problematic weather that has blanketed much of the country this month, February has been anything but chilly for investors. The first three trading weeks of this month were winning ones for investors, which is in stark contrast to Wall Street’s disappointing performance in January. All in all, investors have brushed off some weak economic data this month as weather-related occurrences that should reverse once the bad winter weather is in the rearview mirror. That assumption, along with some relief, at least for now, that emerging market troubles have subsided a bit and the Federal Reserve, under new chair Janet Yellen, plans to stay the course with regard to the tapering of its monthly bond purchases, has emboldened the bulls of late and pushed the major equity indexes higher. In fact, the broader S&P 500 Index was within a few points of its all-time high earlier this week.
As for today, the major averages never strayed too far from the neutral line, but did succumb to some mild selling in the last half hour of trading. Still, there was a mildly firmer undertone to trading throughout the day, as advancing issues led decliners by a comfortable margin on the New York Stock Exchange. The performance of the NASDAQ, meantime, was hurt somewhat by a lackluster showing from the heavily weighted technology and healthcare sectors. The energy issues also were laggards today.
The day’s big news on the economy came from the housing market—and that report on January existing home sales did not make for good reading. Specifically, the National Association of Realtors reported that existing home sales, which are completed transactions that include single-family residences, townhouses, condos, and cooperative apartments, dropped 5.1% last month to an annualized rate of 4.62 million homes. That was down from the December total of 4.87 million homes and was a little below the consensus expectation for January of 4.69 million houses. However, much like the rest of the disappointing data on the economy this month, economists and investors quickly brushed off the latest setback as weather related. Speaking of the business beat, next week will bring several important reports, including data on consumer confidence, new home sales, durable goods orders, and the latest revision to fourth-quarter 2013 GDP figure.
Meantime, the earnings news next week will be headlined by the retailers, with the latest quarterly results from The Gap (GPS), Target (TGT), Macy’s, (M), Nordson (NDSN), and Barnes & Noble (BKS), among others due. Shares of the latter company moved higher this afternoon after reports surfaced that G Asset Management said it wants to acquire a 51% stake in the company for $22 per share. The stock finished the session a little below $18. Two other stocks that were active today on earnings announcements were Hewlett-Packard (HPQ) and Groupon (GRPN). Shares of the computer giant, on solid earnings results, briefly hit a new 52-week high before settling lower for the session, while the stock of Groupon dropped sharply on forecasts of a quarterly loss for the first quarter. Shares of both companies face intense competition in their respective industries. - William G. Ferguson
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
12:15 PM EST - Stocks are modestly higher today and apparently headed for their third weekly gain in a row after a difficult month in January. Right around the noon hour on the East Coast, the Dow Jones Industrial Average is up 36 points and the NASDAQ is 13 points to the good. Most other averages are higher, too, including the Dow Transports, Dow Utilities, and the Russell 2000 small-cap index. Market breadth affirms the general feeling of bullishness, with nearly two stocks up for every one down on the New York Stock Exchange.
The morning’s economic news regarding a 5.1% decline in existing home sales in January, to the lowest level in 18 months, wasn’t a plus for the market, but poor weather was a big factor behind the slowdown. Lately, business data have been skewed to the downside because of icy, snowy conditions affecting much of the nation over the past couple of months. As such, Wall Street has been discounting unexpected weakness in a number of economic reports, and that seems to be the case again today. But the National Association of Realtors also noted that rising mortgage rates and home prices, as well as an inadequate inventory of homes for sale, played a role in the slowdown.
In company news, shares of priceline.com (PCLN) are moving higher after the online travel agency last night reported a sharp increase in its fourth-quarter profits, driven by strong bookings and a rise in gross margins. Priceline appears to be benefiting from increased traffic at its website as a result of its recent acquisition of Kayak Software.
Among the day’s most active issues is Dow-30 component Verizon (VZ - Free Verizon Stock Report), which has completed its $130 billion acquisition of the 45% stake in Verizon Wireless, formerly owned by Vodaphone (VOD). Verizon shares are little changed, after making a nice move to the upside yesterday.
A big winner today is the stock of Emeritus (ESC), which has agreed to be acquired by Brookdale Senior Living (BKD). The merger is expected to help the combined company deliver lifestyle solutions for the growing number of aging senior citizens.
Among the session’s losers, though, includes the shares of Newmont Mining (NEM). The copper and gold producer recorded a steep impairment charge and its bottom line was hurt by weaker selling prices.
Heading into afternoon trading, the market’s tone is mostly positive. - Robert Mitkowski
At the time this article was written, the author did not have positions in any of the companies mentioned.
Stocks To Watch From The Survey - Although the stock market seems poised for a weekly gain, investors will likely be keeping a close eye on existing home sales data that are set to be released this morning. That is especially so after new housing starts greatly disappointed earlier this week, with construction sliding 16% in January.
On the corporate front, priceline.com (PCLN) has been actively traded since reporting better-than-expected fourth-quarter results after the bell last night. However, the on-line travel site’s guidance generally fell short of consensus. Much in this vein, department store chain Nordstrom, Inc. (JWN) also posted healthy fourth-quarter results, while issuing weaker-than-anticipated guidance. In contrast, Hewlett-Packard (HPQ) not only beat expectations, but the computer maker also raised its outlook.
Elsewhere, it will be interesting to see how Wall Street reacts to news of Starwood Hotels’ (HOT) and Juniper Networks’ (JNPR) plans to return capital to shareholders via dividends and share repurchases.- Andre J. Costanza
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - After its late selloff on Wednesday and some less-than-compelling subsequent performances around the globe overnight and early Thursday morning, our stock market, not surprisingly, started yesterday session to the downside, albeit not aggressively so. But that weakness was short-lived, and within a half hour, or so, the leading averages had turned around, and were proceeding to press nicely higher.
Behind the initial selloff, and the coincident weakness abroad, were the aforementioned selloff Wednesday on our shores, a dour manufacturing survey issued by China earlier yesterday, news of a sharp decline in consumer prices in France, and concerns about expressions of hawkishness by a few Federal Reserve Board members in the latest FOMC minutes issued on Wednesday. But such worries, as noted, dissipated quickly and stocks turned sharply higher by late morning, especially the Dow Jones Industrial Average, which pressed ahead by nearly 100 points before noon in New York. It then continued to hold those gains through the lunch hour, although in a somewhat choppy manner, and built on them in early afternoon. The other indexes also moved forward, but with a bit less vigor.
Other influences on trading included earnings, where the Dow-30 component and giant retailer Wal-Mart Stores (WMT - Free Wal-Mart Stock Report) missed on the bottom line and issued tepid guidance. That stock eased back a bit, but did not succumb to a more material selloff, we think, as much of that softness was blamed on the weather. As conditions improve this spring, the thinking apparently is that earnings will pick up as well. Elsewhere, Facebook (FB) shares eased back slightly, initially, as some questioned the price that is to be paid for an announced acquisition. However, when the shares of the social networking standout remained near their record high above $65, as perhaps some second thoughts on the deal surfaced, the selling evaporated and the stock began to edge higher.
As the afternoon evolved further, we saw some additional strength accumulate in the averages, with the Dow crossing the 100-point plateau on several occasions, finally ending the session with a gain of 93 points. It seems that every time there is an attempt to take some profits, the buyers rush in, fearing that they will be left out of any subsequent rally. It has been that way for much of this historic bull market's multi-year run. Along with the Dow's gain, we saw increases in the Standard and Poor's 500 Index (up 11 points), the NASDAQ (ahead by 30 points), and the small-cap Russell (in the black by 13 points). With yesterday's solid gain, the Dow, the Standard and Poor's 500 Index, and the NASDAQ are all in the plus column for the holiday shortened week, with just today's trading session to go.
Essentially, the stock market's resilience can be ascribed to a sense that the current economic lethargy is a total weather-related event, and that once the temperatures start to climb on a sustained basis, and the heavy snows disappear, activity levels will again increase. Our sense is that after growing by 4.1% and 3.2%, respectively, in last year's third and fourth quarters, GDP is likely to stumble in the current three months, totaling a gain of 2%, or less, but then stage a comeback in the spring. For the year as a whole, our sense is that growth will approximate 2.7%-3.0%, a credible showing, overall. For now, it seems, most traders are simply ignoring the economic data. Also, in an encouraging report, Markit's flash U.S. purchasing managers index came out and showed a gain for the latest month. That increasingly popular metric seemed to encourage traders, who have been seeing one listless report after another. As to the economy today, the principal report will be the issuance of data on sales of existing homes during January. Here, too, the weather undoubtedly played a major role, and expectations are that such volume fell modestly. As there is no construction issue for these homes, the setback was likely less severe than the 16% drop in January housing starts.
Now, as we look ahead to the week's concluding session, we find that the early U.S. indicators are positive at this time, with the Standard and Poor's 500 Index futures ahead by more than three points and the NASDAQ futures up by almost seven points, thus presaging a nicely higher opening when traders get down to business in less than an hour from now. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.