Before The Bell - Following a stellar start to an often volatile, but frequently rather positive, month of October, including another sizzling performance on Monday, the stock market took a modest step back yesterday, with losses in the Dow Jones Industrial Average, the S&P 500 Index, and the NASDAQ.
Much of the shortfall, which came to 158 points in the Dow, reflected some softness in the financial and industrial sectors. Still, even after yesterday's setback, the blue chips still are just about flat on the year, despite a monumental collapse in late March as the coronavirus swept the globe.
Better yet, even with yesterday's losses, the S&P 500 Index remains ahead by 8.7% so far this year, while the NASDAQ's cumulative 2020 advance now tops 32%. For one day, however, nine of the S&P's 11 sectors showed declines, with notable weakness in the financial group.
Hurting yesterday's showing was disappointing news on the COVID-19 vaccine and treatment fronts and signals of a further impasse on stimulus talks. Not all of the headlines were dour, though, as shares of streaming giant Netflix (NFLX) rose on news the company would no longer offer free 30 day trials.
Overall, though, most issues did poorly, including some large banks, such as Dow Jones component JPMorgan Chase (JPM) and Citigroup (C). In the case of the former, it had solid third-quarter earnings, but also said it would extend the suspension of stock repurchases until at least the end of this quarter.
A weak profit performance. Meanwhile, took the wind out of Citigroup shares. Also down were airline stocks and some issues with hopes for a coronavirus vaccine, such as Dow member Johnson & Johnson (JNJ), which halted its vaccine trials after a patient became unexpectedly ill.
The unsettling news out of JNJ and also from drug maker Eli Lilly (LLY) that its antibody treatment for the coronavirus had been halted due to potential safety concerns affected not only these issues but equity market sentiment in general yesterday.
Even with this mild retracement, stocks continue to do well and valuations are somewhat elevated again and, therefore, the stock market is once more quite risky. Looking ahead after this unimposing performance, the equity futures point to the middle session of the week starting on a flattish note. – Harvey S. Katz, CFA