After The Close - Stocks turned in another winning performance today in a session that resembled yesterday’s, but with more inclusion on the upside and less volatility. At the closing bell, the Dow Jones Industrial Average was 61 points to the good, while the S&P 500 and NASDAQ each tacked on six points. Once again, tech shares were relative laggards, as shown by a much stronger advance/decline line on the Big Board than the NASDAQ.
In what might be a positive sign for the market heading into 2015, some of the day’s bullishness seemed to stem from a batch of positive economic data this morning. Investors lately have, at times, accorded more weight to the negative effect of higher interest rates that a strong economy would bring, than to the benefit improving business conditions would have for corporate earnings. Such rate fears did not surface today.
An hour before trading began, the Labor Department reported that weekly initial unemployment claims fell below 300,000, indicating strength in the job market. Then, too the U.S. manufacturing sector expanded in August at the fastest pace in several years, according to financial data firm Markit.
The good news kept coming with the release of a survey out of the Philadelphia Federal Reserve showing factory activity in the Mid-Atlantic region rose in August to its highest point since early 2011.
Moreover, there were favorable signs that the housing market was coming out of a slump. The National Association of Realtors said July sales of existing homes rose more than expected, to their fastest annual rate in nearly a year.
A drop in mortgage rates may be partially responsible for the pickup in housing activity. Mortgage giant Freddie Mac reported that the average 30-year loan fell to its lowest level in 2014, or to a rate last seen in July of 2013. Mortgage money has become less expensive as the yield on the 10-year Treasury note has fallen this year. Worries about tensions in Europe and the Middle East have boosted demand for the perceived security of government holdings.
Among the stock market’s major sectors, the financials led the way, helped by improved sentiment toward Bank of America (BAC). B of A settled a major lawsuit with a number of counterparties regarding its role in the mortgage crisis that occurred about five years ago.
Tomorrow, the tone of comments from Federal Reserve officials holding a conference in Jackson Hole, Wyoming could influence the market’s direction. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:05 PM EDT - The bulls, to use a sports term, secured the so-called hat trick yesterday, as the stock market, save for the NASDAQ and the Russell 2000, posted its third win in as many sessions so far this week. Moreover, it now appears on track to make it a so-called four-peat today, if the early trends are a barometer.
Specifically, the equity market, boosted even before the start of the trading day, by news that the number of people applying for unemployment benefits fell below 300,000 for the third time in the past five weeks, started out nicely to the upside. On point, the Dow Jones Industrial Average jumped to a 35-point gain at the start of trading, putting that composite back above 17,000. The intraday record is 17,151. At the same time, the more broadly configured Standard and Poor's 500 Index climbed to just under 1,990. That put this composite above the all-time closing high, and just a tad below the intraday record. The NASDAQ, too, edged a bit higher in the early going. However, the small- and mid-cap indexes lagged once again.
Stocks built upon this early edge into the 10:00 AM (EDT) hour, when a pair of key monthly releases hit the wires. Specifically, the National Association of Realtors (a trade group) posted its report on existing home sales for July. Then, the leading indicators for that same month were issued by the Conference Board, a research organization. In the former case, it was reported that annualized home sales had come in at 5.15 million units last month, up 2.4% from June's 5.03 million homes sold. That was above consensus expectations of 5.00 million. Prices also edged higher. Such totals suggest that the recent pause in this sector may be nearing its end. Also, the leading indicators series posted a strong 0.9% increase last month. That rise, too, was well above forecasts calling for of a 0.6% gain. Such reports augur well for overall economic growth in the months to come.
The market ran with these economic upticks, meanwhile, and the Dow soon was climbing to a gain in excess of 50 points. The S&P 500 Index, fresh off of having surpassed its record closing high during the session yesterday, then exceeded its intraday peak, albeit just barely, before softening briefly. Overall, the gains were irregular, as the NASDAQ soon slipped into the red, showing similar weakness to yesterday. As to the rest of the market, it, too, failed to advance further for a time, but generally held at those 10:00 levels through 10:30. Then, a new wave of buying took hold, which pushed the Dow ahead to an increase of more than 80 points briefly, while the NASDAQ inched back into the black for a time.
Today's ongoing, but still irregular, strength undoubtedly reflects the evidence of further resilience in the domestic economy, as well as the absence of new crises in Eastern Europe (although there is no shortage of military concerns in that fractious locale). In the meantime, there may also be optimism that tomorrow's Jackson Hole, Wyoming economic conference, at which Fed Chair Janet Yellen and European Central Bank President Mario Draghi will address the attendees, will be reassuring on the monetary front.
All told, as we reach the noon hour along the East Coast, we find that the market's strength is still in place, with the Dow ahead by 73 points; the S&P 500 Index better by a handful of points; but the NASDAQ no better than flat. A similarly mixed pattern is now in evidence in the small- and mid-cap arena, while an uneven pattern likewise is in evidence for the market as a whole. To wit, seven of the 10 leading equity groups are now posting gains, with the lone area of moderate notable weakness the basic materials sector, where some of the metals plays are under pressure. Similarly the advance-decline ratio is showing some strength on the Big Board, but further weakness on the NASDAQ. As to volatility, the VIX, or the fear gauge, is slightly lower at 11.70, signaling that most traders are now complacent, which, itself, could be cause for concern down the road.
Given the favorable trends, we would expect the market to hold, or even add to its modest gains as the afternoon unfolds. Stay tuned. - Harvey S. Katz
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 – July-period results, many of which are from retailers with fiscal quarters that end in July, continue to flow in at a brisk pace. Investors appeared fairly pleased with results and/or outlooks from Victoria’s Secret parent L Brands (LB), specialty apparel and accessories retailer The Children’s Place (PLCE), computer company Hewlett-Packard (HPQ), meat and packaged foods company Hormel (HRL), and semiconductor designer Semtech (SMTC). Indeed, all of these stocks are moving higher ahead of the bell, in response.
The news was not as good elsewhere, however, and Wall Street took issue with updated financials from restaurant operator Popeyes Louisiana Kitchen (PLKI) and retailers Stage Stores (SSI), Stein Mart (SMRT), Sears Holdings (SHLD) and Dollar Tree (DLTR). These equities are all indicating lower openings this morning, as a result. Most of the declines are moderate, although SSI stock is showing considerable weakness.
In other news, Bank of America (BAC), one of the nation’s largest banks, appears set to announce a nearly $17 billion settlement with the Department of Justice related to the company’s mortgage dealings during the housing boom that proceeded the most recent recession. BAC shares are up slightly in the premarket. – 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 had run up in unrelenting fashion during the initial two sessions this week, appeared set to undergo some modest profit taking early yesterday. And on cue, the market did soften somewhat at the open and during the first hour, or so, of the trading day. On point, the large-cap averages headed lower initially, but with some more significant weakness soon evident in the small-cap Russell 2000, which stayed notably lower throughout the morning and into the afternoon.
In addition to profit taking, the bulls also turned a touch cautious ahead of the 2PM (EDT) release of the Federal Reserve's minutes from its last FOMC meeting in late July. However, the bears did not have much going for them and, notwithstanding some softness in the advance-decline line, especially on the NASDAQ, where losing stocks held a formidable edge over winning issues, the indexes soon turned the corner into the plus column. In fact, by lunchtime, the large-cap composites, the Dow Jones Industrial Average, the Standard and Poor's 500 Index, and the tech-laden NASDAQ, were all in the black, albeit barely with respect to the latter two. The Dow, boosted by another gain in the shares of retailer Home Depot (HD - Free Home Depot Stock Report), held onto a somewhat larger gain. Its chief competitor Lowe's Cos. (LOW), though, faltered initially on a less-forgiving outlook, but soon recovered its bearings and pushed a bit higher, actually managing to post a 52-week high by the afternoon. The reason likely is that the outlook for this sector is still promising over the next few quarters, at least.
And the upturn built from there, with the Dow approaching a 50-point gain as the hour for the release of the Fed minutes drew near. When those minutes were released, though, the market immediately pared its gains, with the NASDAQ, in short order, falling back into the red by 10 points. Earlier in the day, that composite, albeit lagging, did manage to hit a multi-year high. What caused investors to show some caution were comments to the effect that the bankers were suddenly sensing that the labor market was improving faster than expected. However, despite this somewhat hawkish view, the minutes also maintained that the labor market was not sufficiently strong to cause the central bank to alter its go-slow approach on the monetary front. It seemed as though this latter view was held by a majority of the Fed officials.
This apparent divide and the fact that most Fed officials still favored a gradualist approach on the rate front, soon put the bulls back in charge, and within an hour or so of the release of the minutes, the market was steaming ahead to its best levels of the day, with the Dow, for example, rising to roughly a 75-point gain late in the session. The NASDAQ, too, moved onto the plus side of the ledger for a time, albeit just barely, before slipping ever so slightly back into the red by the end of the day. Meantime, advancing stocks caught up with declining issues and finally passed them on the Big Board, but continued to lag well behind on the NASDAQ, where some high-profile tech names were under pressure.
The equity market then sustained an in-and-out pattern, finally ending a choppy session with suitably uneven gains. Specifically, the Dow inked an advance of 60 points, while a gain of five points was posted by the Standard and Poor's 500 Index. The NASDAQ, as noted, ended a tad in the red, losing just a point. The S&P Mid-Cap 400 ticked a bit higher, but the Russell 2000 could not make it back into the plus column, but did manage to pare its earlier losses somewhat. All in all, it was a better day, but just grudgingly so.
Now, a new day starts, and right away we saw some choppiness overnight in Asia, with the Nikkei up nicely, while weaker data out of China hurt some other markets over there. Now, in Europe, the bourses are all nicely higher, benefiting from the absence of any new crisis out of Ukraine. Over here, finally, our futures are pressing modestly higher at this time with gains on the order of four points in the S&P 500 Index and almost six points in the NASDAQ. As to influences, the market's next material challenge will come tomorrow, when both Fed Chair Janet Yellen and European Central Bank President Mario Draghi will speak at the economic get together being held at Jackson Hole, Wyoming. What comes out of that confab could well be market moving.
In the meantime, the lone issuances of note today will be the 10:00 AM (EDT) release of July existing home sales data, where a flattish number is the current estimate, and the release, at that time of the leading indicators survey for July. Here, a solid gain is the consensus forecast... - Harvey S. Katz