After The Close - Equities put in a choppy performance today, as investors await the start of the first-quarter earnings season. At the end of the session, the Dow Jones Industrial Average, which was under pressure for much of the day, was ahead seven points; the S&P 500 Index was up 10 points; and the NASDAQ was higher by 55 points. Market breadth showed some support for equities, as advancers were easily ahead of decliners on the NYSE. From a sector perspective, the technology and energy stocks displayed leadership, offsetting weakness in the utility names.
In economic news, the Consumer Price Index (CPI) increased 0.4% during the month of March, which was slightly higher than had been anticipated. Nonetheless, the core rate (excludes food and energy) only showed a 0.1% advance for the period. For now, there is little evidence to suggest that inflationary pressures pose a threat to the economic expansion. Meanwhile, in the afternoon the FOMC released the minutes from its latest meeting. Some investors were temporarily rattled by remarks about the interest-rate outlook, but these concerns were soon shrugged off. Tomorrow, we get a look at a few more economic news items, including the latest weekly initial jobless claims figures, and the Producer Price Index (PPI) for the month of March.
In the corporate arena, it was a relatively quiet day. However, Delta Air Lines (DAL) posted a favorable report, moving that stock higher. On a related note, shares of Boeing (BA – Free Boeing Stock Report) were under pressure again, as investors continue to process the developments surrounding the 737 Max 8 plane. Looking to the end of the week, banking giant JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) is set to deliver its results Friday, along with a few other notable financial names.
Technically, stocks have been holding up nicely this year. Going forward, much will likely depend on the quality of the numerous first-quarter earnings reports soon to be released.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market followed up an indecisive Monday with a sharp decline early yesterday. Lingering concerns about corporate profits as first-quarter earnings season rapidly approached. In all, the Dow Jones Industrial Average quickly fell more than 200 points, with the industrial, energy, and financial stocks leading the way lower. Friday will begin the kickoff to reporting season with results from Dow component and banking behemoth JPMorgan Chase (JPM – Free JPMorgan Stock Report) leading the way. Overall, expectations are fairly low for earnings season, with an aggregate loss the rule.
In addition to earnings, the Street also was focused on trade, with investors assessing the potential fallout from the Administration's threat to impose new tariffs on European goods. On Monday, the U.S. Administration had released a list of $11 billion in European goods was thinking of putting tariffs on, ratcheting up trade tensions on both sides of the Atlantic. So, the sellers held sway as the morning progressed, with just minor improvement commencing as we passed the 90-minute mark of the session. Selective strength on the tech side, notably shares of Apple (AAPL – Free Apple Stock Report), which continued their ascent above $200, was noted.
The stock market continued to drift into the noon hour on the East Coast retaining a notable loss in the Dow and proportionately lesser setbacks in the S&P 500 and the NASDAQ. Overall, the level of caution appeared to be high at mid-session, as it normally is as earnings season approaches. Only this time, the problem seems a little more severe, especially in certain sectors. Still, our sense is that if results exceed expectations, the recent strength in the equity market should be sustained. Of course, there also are trade concerns, now suddenly with Europe and more long-range in nature with China.
Then, as the afternoon commenced, the rebound seemed to get some momentum behind it and the Dow's loss was trimmed some more. But after being down by just about 100 points for a brief spell, the market started to weaken anew, with the S&P 500 and the NASDAQ joining ranks in sinking. Also, the S&P Mid-Cap 400 fell rather notably, giving back nearly a percentage point in mid-session selling. As we moved into the final 90 minutes of the trading session, the market was still on its heels, with the Dow off nearly 200 points and the NASDAQ and S&P 500 and the NASDAQ doing almost as poorly.
The selloff then worsened toward the close, with the Dow briefly falling to a loss of more than 200 points, before settling in with a final deficit of 190 points. The S&P 500 Index ended off more than 17 points, meanwhile, and the NASDAQ closed with a loss of 45 points, after spiking down by more than 55 points just before the final bell. Also, declining stocks overwhelmed gaining issues on the Big Board, as tensions increased ahead of the start of earnings season on Friday. All in all, it was a difficult session, but one that was not unexpected following the outsized gains of recent weeks.
Now, a new day begins, and following yesterday's loss of some significance, the major composites moved largely sideways in Asia in the overnight hours. In Europe, meanwhile, the key bourses are pressing higher at this hour as Brexit meetings loom. Also, oil prices, down yesterday, are rising in early dealings this morning on supply concerns, while yields on the 10-year Treasury note, which closed at 2.50% late in the day yesterday, are still at 2.50%. Finally, the U.S. equity futures are suggesting a higher opening when trading resumes shortly. - Harvey S. Katz, CFA