After The Close - The major averages opened higher today, but soon turned lower. At the end of the day, the final numbers showed some weakness. The Dow Jones Industrial Average, which had been ahead late in afternoon, slipped into negative territory, closing down three points. In addition, the S&P 500 Index was off about seven points, and the NASDAQ was lower by four points. Market breadth was slightly negative today, as losers outnumbered winners by a narrow margin on the NYSE. The healthcare names weighed on the session, as investors feared that a potential shift in the political climate, calling for universal health coverage, could put pressure on this group. In contrast, the consumer issues managed to make some progress.
In economic news, the nation’s trade gap narrowed to $49.4 billion in February, which was a better reading than had been anticipated. Elsewhere, wholesale inventories increased 0.2% in February, while a slightly stronger figure had been expected. Finally, in the early afternoon, the Federal Reserve released its Beige Book summation for the month of April. The report held few surprises.
In the corporate arena, the first-quarter earnings season has gotten under way. Quite a few companies weighed in with their numbers over the past 24 hours. Of note, shares of International Business Machines (IBM – Free IBM Stock Report) lost some ground, as investors remained concerned about the technology giant’s ability to lift the top line. Things went better for PepsiCo (PEP), as that stock moved up on an encouraging report. Elsewhere, it should be noted that Qualcomm (QCOM) stock continued its ascent, fueled by news that a legal dispute with Apple (AAPL – Free Apple Stock Report) has been settled.
Technically, the stock market continues to hold up quite well. It is too early to know how the first-quarter earnings season may play out in the weeks ahead. The guidance provided by the bellwether corporations will likely be of key importance to investors. - Adam Rosner
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, after largely marking time on Monday, broke out of the gate strongly yesterday, with the Dow Jones Industrial Average quickly jumping to a gain north of 145 points. The other indexes soared as well. The main reason for the initial rally was a strong showing by Dow component UnitedHealth Group (UNH – Free UnitedHealth Group Stock Report) on solid quarterly metrics. Another Dow stock that jumped ahead early was medical supplies and drugmaker Johnson & Johnson (JNJ – Free Johnson & Johnson Stock Report), which likewise posted solid quarterly results. However, unlike UnitedHealth, which quickly gave up its gains and headed lower, Johnson & Johnson held up strongly.
That said, once UNH headed lower, the entire market softened, with the Dow giving back much of its advance, suggesting that the long equity upturn may be suffering from some fatigue. Nevertheless, led by bullish activity in the semiconductor area, the market held onto a modest advantage as the morning wound down. Leading the way was the tech-heavy NASDAQ, which largely was able to stay above 8,000. The stock market is thus not too far from across-the-board records in the major large-cap indexes. The small-cap composites also were hanging in there, but with lesser gains.
Meanwhile, in news other than earnings, we saw rather pedestrian figures released for industrial production and factory utilization with nominal declines in each category. Slight increases had been forecast. However, the industrial output decline was all in the mining area, with manufacturing activity holding at the prior-month level. There was little equity market reaction to this report. A more critical survey, on retail spending, will be out on Thursday along with data on the leading indicators. Both reports are expected to be comparatively strong.
As to the market, it moved into the noon hour in New York holding small overall gains and then proceeded to do little of note for the next two hours, or so, before strengthening somewhat more as we moved into the final two hours of trading, led once more by the Dow, even as UnitedHealth Group slid further. Most stocks in that 30-issue index were climbing as the afternoon proceeded, though there were some outliers not going along with the overall modestly bullish tone. The market then would commence the final hour of trading with the averages seemingly headed back toward earlier-session highs.
Stocks would edge back into the close, with the Dow adding 68 points and the S&P 500 Index, which went slightly negative near the end of the session edging back into the plus column by a point. The NASDAQ, boosted by strength in tech added 24 points, closing just at 8,000 after being up just north of 40 points earlier in the day. Advancing and declining issues had little variance, with the Street mainly awaiting the further flow of corporate results and some pending economic issuances. The likelihood is that the market will head higher from here, but the advance may be uneven.
Now, a new day gets under way, and we see that stocks were mostly higher in Asia overnight, while in Europe, the main bourses are thus far trending upward, as well. Also, Treasury note yields, up sharply on the 10-year vehicle in action yesterday, to a close of 2.59%, are now at 2.61%. Oil, too, is higher in early7 dealings and the U.S. equity futures are suggesting a somewhat better opening when trading resumes this morning. – Harvey S. Katz, CFA