After The Close - Stocks on Thursday closed out the holiday shortened week in relatively quiet fashion, but posted nice gains overall for the four-day period. Stocks bounced back this week after last week’s bruising, which saw 2%-3% declines on the major averages after selling in high-priced tech and biotech shares spilled over into the broader market.
As for Thursday’s session, the Dow Jones Industrial Average dipped 16 points, but the NASDAQ gained nine points. Market breadth was decidedly positive, with gainers topping decliners by about a 3-to-2 margin on the Big Board. For the week the Dow rose 382 points, recouping nearly all of last week’s 386-point drop, while the NASDAQ’s 96-point weekly advance made up most of last week’s 128-point setback.
Sentiment on Thursday was inhibited by less-than-resounding results from Dow-30 component IBM (IBM - Free IBM Stock Report) and search giant Google (GOOG).
More broadly, investors are still wrestling with the high valuations accorded certain technology stocks. Reminiscent of the late-1990s’ Internet boom, shares of certain social media and biotech companies are trading on the basis of potential future earnings, any number of which may not live up to expectations.Meantime, a shifting backdrop that includes the Federal Reserve providing less liquidity by tapering its bond-buying program; problems between Russia and Ukraine; and a hot IPO market that has created competition among tech stocks for buyers, has taken some of the air out of momentum stocks. That, in turn, has resulted in at least the beginning of a shift to so-called value stocks, similar to what occurred in 2000 after the tech sector fell out of favor.
Whether the increased interest in more traditional stocks continues may depend on if the economy makes further progress. On that count, the news on Thursday was favorable, with new claims for unemployment benefits approximating levels seen prior to the last recession and a report from the Philadelphia Federal Reserve indicating a sharp increase in regional business activity in April.
That sort of data supported names in the energy and industrial sectors. Energy stocks also benefited from a modest rise in oil prices, despite word of an agreement between Secretary of State John Kerry and his Russian counterpart to defuse the escalating tensions in Ukraine.
However, the good economic news caused a selloff in government bonds, where the yield (which moves in the opposite direction of prices) rose to 2.72%, from 2.64%.
The U.S. financial markets reopen Monday after being closed in observance of Good Friday. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:00 PM EDT - The U.S. stock market got off to a weak start this morning, but has since recovered to some degree. Notably, stocks have advanced for the past three sessions, and it remains to be seen if the bulls can mount another sustainable buying campaign today. At just past noon in New York, the Dow Jones Industrial Average is off 27 points; the broader S&P 500 Index is off one point; and the NASDAQ is now weaker by two points. Market breadth is moving toward a neutral position, with advancing stocks about even with decliners on the NYSE. Most market sectors are still advancing today, with particular strength in the industrials and the energy names. In contrast, the defensive utilities are lagging. On a related note, we have observed a shift in sector leadership over the past few weeks. Specifically, investors have been selling the high-flying growth names in the Internet and biotechnology industries, while moving into value-oriented stocks in the utility, materials, and energy sectors. This type of rotation is not uncommon in a mature bull market and does not necessary signal that the party is over. However, it may indicate that traders might be feeling more cautious. Further, it remains to be seen if this group rotation is temporary, and how it will play out over time.
Technically, yesterday’s advance put the S&P 500 Index back above 1,850, which is likely a key area to watch. Trading volumes have been decent, but not overwhelming, which may indicate some caution on the part of the bulls. If the broad index moves higher from here, the next target will likely be the 1,880 area, which presented some resistance on several occasions in March.
Today’s economic reports were generally constructive. Initial jobless claims came in at 304,000 for the week ended April 12th. This showing was lower than many had anticipated, but slightly higher than the prior week’s figure. Weekly continuing claims, too, moved in the right direction. Elsewhere, the economy in the Philadelphia region performed quite a bit better in April than had widely been expected. There will be no economic news released tomorrow in observance of Good Friday.
Meanwhile, the first-quarter earnings season is now in full swing, with numerous leading companies reporting. Recently, we heard from Google (GOOG). That issue is trading lower, after the technology leader released somewhat disappointing results. Shares of IBM (IBM - Free IBM Stock Report) are also under pressure following a mixed report, which included weaker revenues. Elsewhere, shares of General Electric (GE - Free GE Stock Report) are advancing, after the conglomerate provided an encouraging outlook. - 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 – Earnings season has shifted into high gear, as a slew of high-profile companies have reported March-period results. Financials had a good showing, as shares of investment banks Goldman Sachs (GS – Free Goldman Sachs Stock Report) and Morgan Stanley (MS), as well as asset managers BlackRock (BLK) and The Blackstone Group (BX), are all moving higher ahead of the bell on earnings news. The same is true for industrial conglomerates General Electric (GE – Free General Electric Stock Report) and Honeywell International (HON), as well as oilfield services providers Baker Hughes (BHI), Noble Corp. (NE), and Schlumberger (SLB). Investors also appeared pleased with quarterly results and/or outlooks from flash memory data storage manufacturer SanDisk (SNDK), beverage and snack giant PepsiCo (PEP), restaurant operator Chipotle Mexican Grill (CMG), and tobacco company Philip Morris International (PM).
Things in the tech sector were not as rosy, however, with Internet bellwether Google (GOOG) missing on both the top and bottom lines and International Business Machines (IBM – Free IBM Stock Report), a supplier of mainframe computers, software, and services, delivering in-line earnings, but weaker-than-expected revenues. Both stocks are indicating moderately lower openings this morning, in response. Shares of credit card issuer American Express (AXP – Free American Express Stock Report), health insurer UnitedHealth Group (UNH – Free UnitedHealth Group Stock Report), chemicals company DuPont (DD – Free DuPont Stock Report), and toy maker Mattel (MAT) are also down in the premarket on earnings news. – 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 - Just days after the stock market had appeared to be on the threshold of a long-awaited correction, the heretofore shaken bulls have regrouped and thrown caution to the wind. To recap, following a nice snapback rally on Monday, the bears were out in force early Tuesday morning and proceeded to send stocks notably lower into the midday. However as if on cue, the bulls steadied themselves and began to turn things around.
This latest comeback then carried into the close, with the major equity averages all showing moderate increases on the day. This notable turnaround then carried through yesterday, as the week's biggest gains were recorded, including an outsized 162-point advance in the Dow Jones Industrial Average and a 52-point rise in the NASDAQ. It was the biggest three-day rally in the blue-chip composite thus far this year. Talk of a correction has been silenced, at least for the moment.
Encouragingly, this recovery has come against a dour international economic and political backdrop, which has seen China, the world's second largest economy, report a further slowdown in economic growth, while in Ukraine, additional political deterioration is taking place. As to China, the latest GDP report, albeit slightly better than forecast, still represented a slowing increase in growth, and one that held out hopes that the government there would opt to take on additional stimulus measures. Such a course is generally smiled upon by the global financial markets.
Meanwhile, on the economic front at home, the latest session saw the release of data showing a modest increase in housing starts for the latest month and a further gain in industrial production. Such upbeat metrics suggest that growth in the recently concluded first quarter may well have approached 2%. That is a modestly better outcome than we would have expected just weeks ago. In fact, while that would be a somewhat subpar result, it would not be all that bad given the harsh winter and the notable penalties to growth borne of such a dour business background. Our sense is that growth in the current quarter will be close to 2.5%, or even a tad better.
As to the other current big factor on our shores, earnings, they have been mixed, with some companies easily beating profit targets, which in a number of cases have been reduced, while others struggle with their results, either falling short of modest expectations or just about matching such views. In any event, the quarter is shaping up to be a mixed affair from an earnings perspective.
As to the day ahead, the U.S. equity futures are pointing to a mixed opening, with the Standard & Poor's 500 index futures and the NASDAQ futures having overcome some early slippage, after a number of companies, headlined by industrial giant and Dow component General Electric (GE - Free GE Stock Report), beat on the bottom line. That stock is showing a small increase in the pre-market. However, tech stalwart IBM (IBM - Free IBM Stock Report) is indicating a big pre-market loss after that Dow mainstay reported an eighth straight quarter of falling revenues. That issue is off about 4% in the pre-market. Finally, PepsiCo (PEP) posted somewhat better quarterly metrics and that stock is suggesting a higher opening when trading resumes in less than an hour from now. So, on the whole, we seem headed for an uninspiring start to the day. But weaker starts have not been a major obstacle for Wall Street to overcome--at least thus far this week.
Finally, we note that the stock market will be closed tomorrow in observance of the Good Friday holiday. Today will be a regular trading session for equities. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.