After The Close - The market started slightly higher today, as solid earnings reports out of American Express (AXP – Free American Express Stock Report) and The Travelers Companies (TRV – Free Travelers Stock Report) helped improve sentiment. Too, U.S. jobless claims reached a 50-year low, while March retail sales posted a much bigger-than-expected increase of 1.6%, aided by good auto and gasoline sales. These moves caused the market to move higher in the first moments of trading with the Dow Jones Industrial Average moving nicely to the upside. However, early trading was rather choppy, and the indices moved lower for a brief spell, but just as quickly, reverted back into the green. The S&P 500 spent a bit more time trading at a loss, but gradually moved towards the upside along with the other composites. The markets traded slowly higher for much of the rest of the session and the Dow rose by as many as 153 points before retreating in the final portion of trading. All told, the Dow closed higher by 110 points, while the S&P 500 rose by around five points.
Additionally, market breadth was rather neutral, as trading today favored neither advancers nor decliners. Industrial stocks were among the strongest performers on the day, while energy equities were among the weakest.
In commodity news, oil prices ended modestly higher as decreased supply from Saudi Arabia and a drawdown in U.S. inventories occurred. Meantime, U.S. Treasury bond yields fell, as a flight to the safe-haven asset occurred. The VIX Volatility Index was lower, as demand for options protection fell a bit.
Looking ahead, the markets are closed tomorrow for the Good Friday holiday. However, some economic data including housing starts and building permits for March are expected to be released. Additionally, the futures markets are expected to be moved by a few companies that will report quarterly results after the closing bell today. Next week, earnings season continues, and as many as 12 Dow components are slated to release quarterly results. - John E. Seibert III
At the time of this article’s writing, the author held positions in the following companies (TRV).
Before The Bell - Optimism on the earnings front and better economic metrics out of China helped get stocks off on the right foot yesterday morning, as Wall Street prepared for the long Easter and Passover weekend that lies ahead. As to earnings, the Street was buoyed strongly by better-than-expected earnings and revenues from investment banking giant Morgan Stanley (MS). The company did especially well in its fixed income trading division. The shares rose modestly. Also, railroad giant CSX (CSX) did well on the profit front, and that pushed its stock forward nicely as the session got under way.
In all, nearly 85% of the S&P 500 companies that have reported so far, and reporting season is still in its infancy, have topped expectations. Still, forecasts continue to call for a modest aggregate decline in profits for the period. Meantime, one company that didn't participate in the market's early rise was tech behemoth and Dow Jones Industrial Average member International Business Machines (IBM – Free IBM Stock Report). That issue posted revenues that were a bit light, and the stock reacted accordingly, suggesting that the Street will reward solid reports, but seriously punish companies that fall short of expectations.
Meanwhile, the buying burst also was helped along by a better economic reading out of China, with that nation's economy expanding by 6.4% in the first quarter; forecasts had called for a 6.3% GDP gain. However, the sharp pullback in IBM pushed the market into the red, including the NASDAQ, which initially had been lifted by strong gains in the semiconductor stocks. The downward push was mild, however, with the NASDAQ returning to the black in short order. The Dow, however, still hurt by IBM, remained modestly in the loss column as we passed the first hour of trading
Things would not change much as the morning concluded and the afternoon began, with modest losses generally the rule, as the Street awaited the 2:00 PM (EDT) release of the Federal Reserve's Beige Book. That compilation, which will be used by the Fed to help it formulate economic policy at its next FOMC meeting (on May 1st) suggested that the economy was still generally expanding at a slight-to-moderate pace, with tightening labor markets, but mixed consumer spending. Thus, there was little in the report to either excite or unnerve investors
So, stocks would continue to meander about, with little bullish or bearish momentum. Any strength, and there was some, was largely in the tech sector and notably with the chip stocks, while weakness was mostly confined, as a group, to the drug and health care stocks. This uneven pattern would then persist into the close, and as all the numbers were in, we saw that the Dow would close off a nominal three points, while declines of seven and four points, respectively, would be tallied by the S&P 500 and the NASDAQ. The small- and mid-cap indexes would be off somewhat more sharply.
Looking out at the final session before the long holiday weekend, we see that stocks were mostly lower in the Asia markets overnight; in Europe, the leading bourses are now fairly flat. Also, oil prices are down and Treasury note yields, flat at 2.59% yesterday, now are passing hands at the same level. Finally, our equity futures have turned upward, driven by a stronger retail sales release, and the markets are suggesting a slightly higher opening when trading resumes this morning. - Harvey S. Katz, CFA