After The Close - The market started off strongly today, as four Dow Jones Industrial Average components recorded better-than-expected results. Indeed, United Technologies (UTX – Free United Tech. Stock Report) beat on both the top and bottom lines, while The Coca-Cola Company (KO – Free Coca-Cola Stock Report) recorded a decent fiscal third-quarter performance. On the other hand, Verizon (VZ – Free Verizon Stock Report) and Proctor & Gamble (PG – Free P&G Stock Report) showed year-over-year earnings improvements, but the stocks were sent lower by traders. Overall, the indices marched higher for a spell, before starting to move in a sideways fashion. Then, new-home sales were released at 10:00 AM EDT, and the market shot higher, as sales reached a 16-month high and handily beat expectations. This caused both the S&P 500 and the NASDAQ to trade above their all-time high closes. However, they stopped short of making new intraday highs. The Dow followed the move higher, but remained further away from its all-time high price. The composite slipped a bit into the close. All told, the Dow wound up higher by 145 points, the S&P 500 rose by 26 points, and the NASDAQ increased 106 points.
Additionally, market breadth was decidedly positive, as advancers outpaced decliners by a 2.8-to-1.0 ratio. Healthcare stocks were among the strongest performers on the day, while consumer staples equities were among the weakest, likely dragged down by Proctor & Gamble’s (PG) modest selloff.
In commodity news, oil prices were higher today, owing to fears about reduced supply. The United States removed waivers for countries to buy oil from Iran, which may well impact the energy market. Also, U.S. Treasury bond market activity was rather negative, as yields fell across the board today. This occurred despite the strong stock market activity. The VIX Volatility Index was lower, as demand for options protection fell.
Looking ahead, all eyes will be focused on earnings, as tomorrow is the busiest day of the earnings season. A number of large companies are slated to report earnings after the bell today. Too, several Dow components are due to release quarterly results tomorrow, including Boeing (BA – Free Boeing Stock Report) before the opening bell, and Microsoft (MSFT – Free Microsoft Stock Report) and Visa (V – Free Visa Stock Report) after the close. Additionally, the Energy Information Administration’s status report on crude oil inventories, among other economic news, is slated for release. - John E. Seibert III
At the time of this article’s writing, the author held positions in the following companies: Coca-Cola (KO), Procter & Gamble (PG), and United Technologies (UTX).
Before The Bell - The stock market, after a three-day holiday weekend induced hiatus, opened up for trading on the busiest earnings week of the season posting modest losses, with aerospace maker and Dow Jones Industrial Average component, The Boeing Co. (BA - Free Boeing Stock Report) among the chief contributors to the early setback that reached 100 points at its nadir during the first few minutes of trading. As to earnings, a large number of S&P 500 companies are scheduled to report their quarterly metrics in the coming days.
As to those profit reports, the bar has been set very low for the period, and those targets should be met and likely surpassed in the coming days. Such expectations have helped to underpin the market in the past few weeks. Moreover, in the days to come, with the vast majority of the month's economic reports already in, the focus will naturally be on earnings for the next fortnight or so. And that should help stocks retain their recent gains, for the most part, with just some negative outliers holding things back.
Regarding the overall movement of stocks in the early going yesterday, the Dow's early 100-point loss was pared notably as we passed the first half hour of trading, with a renewal of optimism assisting the bulls notably. In the meantime, with just over 20% of S&P 500 companies having reported their results, more than 75% have beaten net forecasts for the period. Industrial companies have led the way, boosted by better data on U.S. manufacturing in the past month, or so.
In other news, crude oil prices jumped again following reports that our country was poised to announce an end to sanction waivers for countries now importing crude from Iran. Meantime, in other markets, yields on U.S. Treasury notes inched higher in early morning trading, with the return reaching 2.58%. Still, stocks labored, with the Dow's loss holding at about 70 points as the first hour's trading concluded. However, the overall tone was just modestly negative, with the bulls seemingly poised to turn things around.
The losses would then narrow on the Dow as we hit the noon hour in New York and erase themselves altogether on the S&P 500 and the NASDAQ. The market then would do little as the afternoon began, with the Dow remaining in the loss column through the remainder of the session. The S&P 500 Index and the NASDAQ held to modest gains throughout. In other influences, in addition to earnings, the National Association of Realtors reported that sales of existing homes fell in March.
As the session ended, the major composites were comparatively little changed on the day, with the Dow losing just 48 points, while the S&P 500 and the NASDAQ were off by three and 17 points, respectively. Also, the small-cap Russell 2000 fell six points. So, it was a mixed day, overall. Going forward, a deluge of earnings reports will be issued over the next several sessions. The results for those companies will be critical in how well the market will perform over the remainder of the month.
With respect to the day ahead, we see that shares were mixed in Asia overnight, while in Europe, the major bourses are trading with slight losses thus far. Also, oil, a big gainer yesterday, is trading higher again and U.S. Treasury yields, which ended at 2.59% on the 10-year note, are passing hands at 2.58% this morning. Looking at the U.S. equity futures, the early read is positive. - Harvey S. Katz, CFA