After The Close - Stocks were mostly--but not uniformly--higher today, with the major averages faring better than the broader market. Following two days of broad gains this week, trading started out on a more subdued note this morning, as investors awaited this afternoon’s release of the minutes of the Federal Reserve’s last two-day meeting on July 29-30 in the hope of deciphering clues as to interest-rate policy.
At the closing bell, the Dow Jones Industrial Average had tacked on another 60 points, the S&P 500 was a five points higher, but the NASDAQ closed in negative territory, if just barely. Market breadth was not as convincing, though, with advancers outpacing decliners by a narrow margin on the New York Stock Exchange, but with losers with about an 8-to-5 edge over gainers on the NASDAQ.
Slightly reduced 2014 earnings guidance from home improvement retailer Lowe’s (LOW) contributed to the day’s uneven performance. It would seem like a no-brainer that the company would enjoy very similar trends as its bigger rival, Dow-30 component Home Depot (HD - Free Home Depot Stock Report), which sparked the rally earlier his week when it reported results that pleased Wall Street. But Lowe’s does not seem to be benefiting from the housing market’s recovery to the same degree as Home Depot. Nevertheless, Lowe’s did top analysts’ quarterly expectations and its stock closed higher on the day, after moving lower at first.
For much of the day, stocks seemed to be digesting gains from the past week or so. Coming into Wednesday, the Dow and the S&P had risen four out of the past five sessions and the NASDAQ was on a five-session winning streak. The latest rally has lifted the major averages out of the summer slump endured in late July and early August.
But the outcome of today’s trading was in doubt following the 2:00 PM EDT release of the minutes of the Fed’s last meeting. Stocks gave back most of their gains after it came to light that the central bank was surprised at how quickly the labor market is recovering. That provided investors with greater reason to believe that the days of easy money are numbered. Nevertheless, stocks regained their footing and pushed irregularly higher into the close, as it appeared the Fed minutes contained nothing too drastic.
Tomorrow brings a fresh batch of business data for investors to mull over, including readings on weekly initial unemployment claims, existing home sales for July, and last month’s leading economic indicators. Earnings from several retailers, including The Gap (GPS) are also due out. – Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:15 PM EDT - The major U.S. equity indexes started the day in mixed fashion, and have stayed that way as we reach the midday hour on the East Coast. However, a quick look at the advance/decline line on both the Big Board and the NASDAQ reveals that there is a negative undertone to trading. Losing issues are holding a lead on the winners, to the tune of slightly less than two to one on the NASDAQ, but the spread has narrowed on both exchanges in the last hour. Overall, it has been a rather directionless day on Wall Street. The Dow Jones Industrial Average is modestly higher; the NASDAQ and the broader S&P 500 Index are relatively unchanged; but the small-cap Russell 2000 is a moderate loser.
The initial selective profit taking should not come as a surprise on Wall Street, especially following two successful trading sessions to start the week. The indexes were helped the last few days by a diminution in the geopolitical tensions in Eastern Europe, some supportive economic data yesterday, increasing sentiment that the central bank will keep interest rates near zero at least until mid-2015, and a few good earnings reports, most notably from home improvement retailer and Dow-30 component Home Depot (HD - Free Home Depot Stock Report). Shares of the retailing giant hit another all-time high earlier this morning and the sentiment on Wall Street is that the stock may have more room to run; the stock is giving a big lift to the Dow-30 today.
The session has brought little news on the economy and, save for a lackluster quarterly report from Home Depot’s rival Lowe’s (LOW), there was not much earnings news for the bulls to run with. That, along with some unwelcome monetary policy news from Europe, specifically reports that two voting members at the Bank of England favored raising rates, brought the sellers selectively back into the market. There also may be some hesitation to make any major moves ahead of the release of the minutes from the latest FOMC meeting (due at 2:00 P.M. EDT). The monetary policy decisions by the Federal Reserve have been a hot-button topic for investors during the extended bull run.
From a sector perspective, we are also getting a mixed picture. So far today, the most buying interest has been in the economically sensitive basic materials and industrial groups. Conversely, the consumer staples and energy issues are modestly out of favor today. The remaining sectors in the top 10 are not too far removed from the neutral line.
The earnings news from Corporate America mostly centered on the retailers that have July-ending quarters. As noted, Lowe’s reported in-line quarterly results, but investors were disappointed by the home-improvement retailers’ reduced sales forecast for the year. Conversely, the stock of American Eagle Outfitters (AEO) is rising after the teen apparel retailer reported positive quarterly results. Likewise, shares of Target (TFT), which reported in-line results, are higher on some positive comments from management. The commentary noted that the company appears to be getting past the data breach that created significant negative headlines earlier this year.
Looking ahead to the remainder of the session, we would not be surprised if the recently reinvigorated bulls made a move this afternoon. Within the last half hour, the buying has picked up a bit, and if the Fed minutes were to show the lead bank remains wedded to keeping interest rates near zero until at least early next year, the bulls made be primed to make another late-day statement. Stay tuned. - William G. Ferguson
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 – Retailers are in the earnings spotlight again today, and results were mixed. Lowe’s (LOW) reported July-period financials roughly in line with expectations, but cut its 2014 sales forecast. Shares of the world’s second-largest home-improvement retailer are down moderately ahead of the bell, as a result. Big-box retailer Target (TGT) and furniture seller La-Z-Boy (LZB) did not fare too well, either, causing their stocks to move lower in pre-market trading, as well. The biggest disappointment came from car rental agency Hertz Global Holdings (HTZ), which stated that 2014 results would likely come in “well below” the low end of its previous forecast, citing operational challenges and costs associated with its accounting review, among other items. New guidance was not provided. HTZ stock is down sharply in the premarket, in response.
The news was better elsewhere, however, and shares of fellow retailers Staples (SPLS), American Eagle Outfitters (AEO), and PetSmart (PETM) are all indicating higher openings this morning, with AEO showing considerable strength. Investors should also be aware that PetSmart announced plans to explore strategic alternatives to enhance shareholder value, including a possible sale of the company.
There was also some earnings news out of the food processing industry. Investors were impressed with results from Hain Celestial (HAIN), but took issue with quarterly financials from J.M. Smucker (SJM). – 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 - The stock market, which sprinted ahead to start the week on Monday, tallying another triple-digit win for the Dow Jones Industrial Average, would not succumb to the temptation to take profits yesterday, rising again, with this latest gain, however, not nearly as imposing as the aforementioned upsurge to commence the week.
Encouragingly, and unlike Monday when the stock market's strong surge was driven largely by a diminution in tensions between Russia and Ukraine and some evolving optimism that interest rates would stay low for a while yet, this upturn was in addition reflective of better news on the earnings and economic fronts (see below). First, though, interest rates were still in the news, as there was some optimism building that Federal Reserve Chair Janet Yellen would voice support for keeping borrowing rates at their current minuscule levels for some time longer when she speaks on Friday at Jackson Hole, Wyoming. Indeed, we continue to target the initial rate uptick as coming no earlier than the middle of next year. Even before that meeting, though, we will get the release of the Fed's minutes from its last FOMC meeting. That issuance will come this afternoon.
Looking back at the market's influences yesterday, meanwhile, before trading commenced on our shores, and following some strong gains in Europe's bourses, Wall Street got a nice boost when do-it-yourself retailer and building products behemoth Home Depot (HD - Free Home Depot Stock Report) surpassed earnings forecasts with its upbeat quarterly issuance and raised expectations for the upcoming periods. That stock, in response, took off, rising almost five points, to near an all-time high just on the doorstep of $89 a share. The stellar performance helped the Dow Jones Industrials from the opening bell, lifting that 30-stock composite to a near triple-digit win throughout most of the session.
In addition to earnings, the equity market also was the beneficiary of a pair of reassuring economic reports. Specifically, the Labor Department reported early yesterday that the Consumer Price Index had ticked up by just 0.1% in July, thus meeting expectations. And if we back out the volatile food and energy components, to get the so-called core CPI, we find that the increase also was just a scant 0.1%. That should calm fears that pricing pressures might soon be on the rise. At the same time, the Commerce Department issued its report on housing starts. Here, the news was even better, as the survey confirmed that housing starts had reached an eight-month high, gaining 15.7% last month from June. And, June's level of building, which initially had been reported as having plunged from May, was revised to show a somewhat lesser decline. In addition, building permits, which are decidedly more of a forward-looking barometer, likewise rose, reaching its best pace since April and the second-best level of this year.
In all, stocks started on the upside and never looked back, with the gains fairly broad based, but with a few pockets of weakness. Of note here, among the key groups, we saw softness in the basic materials area, while some of the big telecommunications stocks stumbled. Overall, though, it was another strong session, albeit with less of a dramatic flair than on Monday. Still, following these back-to-back wins for the bulls, the Dow and the Standard and Poor's 500 Index, which seemingly had been on the way to a market correction two weeks ago, now are within striking distance of all-time highs. All told, the Dow, lifted by the big gain in Home Depot, added 81 points; the Standard and Poor's 500 Index rose 10 points; and the NASDAQ tacked on 19 points. The small- and mid-cap indexes also did well, rising in unison, but not nearly to the degree that they had on Monday.
Now, looking ahead to a new day, we find that the equity markets in Asia were in a dour mood overnight, with modest losses being the rule in trading there. The downturns, meantime, were somewhat greater in Europe early this morning, with some concerns that the Bank of England had voted 7-to-2 to keep interest rates at current low levels, with the two dissenters voicing support for raising borrowing costs. Finally, on our shores, and ahead of a light economic news day, the futures are off slightly, with the S&P 500 and the NASDAQ futures each off about two points, and the Dow futures likewise narrowly weaker. In-line earnings from Home Depot rival Lowe's Companies (LOW), but a lackluster sales outlook there isn't helping matters. Indeed, that bellwether retailer is seeing its shares now trade a bit lower in the pre-market. All told, we would look for some mild profit taking at the start of the new trading day, which will commence in less than an hour from now.