After The Close - The stock market started the day lower, as concerns rose about the strength of the upcoming earnings season. The markets have run up considerably since the lows late last December. Even so, expectations for profits are somewhat lackluster. Indeed, the S&P 500 projects earnings to be down over 4% year over year in the first quarter. The Dow Jones Industrial Average fell by almost 240 points in the first moments of the trading session, while the other indices declined in tandem. Though this initial price movement was rapid, momentum to the downside petered out quickly, and the composites spent most of the day trading in a sideways fashion. Still, traders attempted to make a final push lower near the end of the session. Though the Dow and S&P 500 failed to make new daily lows, the NASDAQ handily succeeded. All told, the Dow finished the day down 190 points the S&P 500 closed off almost 17 points, and NASDAQ fell about 45 points.
Additionally, market breadth was decidedly negative, as decliners outpaced advancers by a 2.6-to1.0 ratio. Communications stocks were among the best performers on the day, just barely beating breakeven levels. On the other hand, energy issues were among the weakest hurt by a slide in the related commodities.
In commodity news, oil prices were lower today, weighed down by concerns regarding future demand caused. Meantime, U.S. Treasury bond yields were lower as well, as a flight toward risk-free assets occurred. The VIX Volatility Index was higher, as demand for options protection increased.
Looking ahead, a notable amount of economic data will be released tomorrow, including the Consumer Price Index for March. This will likely be a key input in future U.S. Federal Reserve decisions. Too, the Energy Information Administration’s weekly status report on crude oil inventories will likely drive trading in that commodity tomorrow. Still, we think all eyes will be looking ahead to the start of earnings season, which begins in earnest on Friday, as reports from a several notable financial companies are scheduled to occur. - John E. Seibert III
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Concerns ahead of the pending start of first-quarter earnings season got Wall Street off on a sour note yesterday morning. That setback, which quickly pushed the recently strong Dow Jones Industrial Average to a loss of nearly 180 points, also encompassed the NASDAQ, which fell 47 points early. Regarding earnings, the latest estimates suggest that profits will be shown to have fallen modestly during the initial period. Of course, it is not often the absolute results that hold sway on the Street, but rather how those results compare to the actual estimates.
Those comparisons, to be sure, are unknown at this time. But if the recent past is prologue, they'll likely compare quite well. And if that is the case, stocks should hold up nicely, or even show some improvement. Meantime, after that early selloff, stocks started to recover. That comeback, which helped the Dow to almost halve its loss, took the NASDAQ into the green by almost 2:00 PM (EDT). Optimism about earnings in the tech sector likely had an impact on the better relative showing by the NASDAQ.
The equity market also was hit by some profit taking in certain blue chips. Moreover, among individual issues, Dow component Boeing (BA – Free Boeing Stock Report) fell in price, and rather steeply on a brokerage house downgrade. It was the same story for erstwhile Dow member General Electric (GE). That stock was pushed lower on the downgrade, as well. Investors also were put off by a modest drop in factory orders for February. But the big concern remained earnings and also the absence of closure on the vexing trade dispute with China.
The market's comeback would then persist through the remainder of the afternoon, with Boeing and GE continuing in place, but with the major concern still earnings season. Then, there is trade. On that count, the President has said that recent talks will hopefully bring a deal within the next four weeks. As to the rest of the picture on this quiet news day, the economy still looks reasonably strong, but with some worries about escalating oil prices. Oil rose above $64 a barrel yesterday, while Treasury yields nudged slightly higher.
Things improved a bit further into the final minutes when a late rush of buying in the blue chips, enabled the Dow to pare its closing loss to below 100 points. In all, the blue chip index fell 84 points. A loss also was tallied by the small-cap Russell 2000, while modest gains were inked by the S&P 500 Index and the NASDAQ, with the latter benefiting from strength in such tech stalwarts as Apple (AAPL – Free Apple Stock Report) stock, which nominally ascended the $200 plateau in late dealings.
Looking ahead now to a new day, we see that stocks in Asia were mostly higher in overnight dealings, while in Europe, the leading bourses are tracking upward, as well. In other markets, oil prices, up yesterday, are gaining nominally so far this morning, while Treasury note yields are moving a tad lower. Futures on this second trading day of the week, are lower, as earnings are awaited. – Harvey S. Katz, CFA