After The Close - Stocks enjoyed a fine week in the next to last week of August, except that it ended on a lackluster note on Friday. The past five days saw the Dow Jones Industrial Average rise about 2%, retaking the 17,000 level, and the S&P 500 establish a new all-time closing high. Meanwhile, although the NASDAQ was a bit of a laggard, that tech-weighted barometer still managed to attain its highest level in 14 years.
What cleared the path higher for stocks for the better part of the week was relatively less troublesome news from abroad, positive economic news that pointed to higher corporate profits ahead, and a tame interest-rate outlook.
On Friday, though, international tensions resurfaced between Ukraine and Russia, when a convoy of trucks sent from Russia that was assumed to be carrying aid and equipment for civilians apparently entered Ukrainian territory without being fully sanctioned. That news sent stocks in Europe broadly lower and created a poor undertone for the start of trading day of the week here.
Then, too, stocks had enjoyed such solid gains for the prior week and a half that it was natural for some profit-taking to occur.
As for Friday, the Dow-30 closed 38 points lower and the S&P 500 shed four points. The NASDAQ, however, added six points. Market breadth mirrored the action on the main averages, with decliners besting advancing issues on the Big Board, but with more stocks rising than falling on the NASDAQ.
Friday also saw what turned out to be an anti-climactic event regarding any hoped-for fresh guidance on interest rates from the Federal Reserve. The central bank held its annual conference at Jackson Hole, Wyoming this week and market observers were naturally interested in what Fed Chair Janet Yellen had to say about the state of the economy and interest rates.
For the most part, though, the Fed stuck to its story that the economy’s performance would dictate the rate of any future interest rate increases. Current indications are that rates will begin to rise around the middle of 2015.
In other markets, the yield on the 10-year Treasury note edged lower, with prices rising. The nervousness about Europe was likely a factor there. And oil prices continue their recent slide, falling further under $94 a barrel, after trading at well over $100 a barrel earlier in the year, on reduced worries about shipments from the Middle East and Africa.
In all, it was a very good week for stocks, even with the mixed close today. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:10 PM EDT - The U.S. equity market, which started the session with the Dow Jones Industrial Average up 2.2% for the week, the S&P 500 Index at an all-time high, and the NASDAQ at a 52-week high, succumbed to some initial profit taking, prompted by geopolitical concerns surrounding Eastern Europe. Specially, the investment community was a bit unnerved by reports of Russian convoys carrying first-aid entering Ukraine against that government’s desire. There was some growing worries that the convoy may not be a full humanitarian effort, but as Ukraine’s government classified it, a “direct invasion”. The news from Eastern Europe weighed on the major European bourses today.
Then, the equity indexes briefly rallied into positive territory after Fed Chair Janet Yellen released prepared remarks and spoke in Jackson Hole, Wyoming. The market found some initial comfort as Ms. Yellen took a middle of the road path with regard to future monetary policy decisions. Her remarks were neither dovish nor hawkish. She also noted that the central bank is getting close to its objectives, the FOMC is questioning the degree of remaining slack, but the recent labor market progress may be a bit misleading and more work needs to be done. The consensus is that the lead bank will begin raising rates in early to mid-2015, but the key component is that the hikes will probably be gradual, which may be better received by equity market participants.
Now, as we pass the midday hour on the East Coast we are seeing a mixed- to weaker-performance for equities, but with a growing bearish undertone, as reflected in the lead declining issues hold on advancers, particularly on the Big Board. The Dow 30, the S&P 500 Index, the small-cap Russell 2000, and the S&P Mid-Cap 400 Index are all modestly lower, while NASDAQ is slightly higher, with the latter average helped by shares of technology titan Apple (AAPL) hitting a new post-split high, despite reports that the unveiling of the much-anticipated iPhone 6 may be delayed a bit due to supply issues for the smartphone screens. In the same vein, the technology group is the best-performing area among the top-10 sectors, and currently the only one in positive territory. Conversely, the more economically sensitive sectors, including the basic materials, energy, and the industrial groups, are having a tougher go of it today. Overall, it has thus far been a bearish day for equities, with no big moves following the much-anticipated Fed news.
Meantime, the second-quarter earnings season is nearly in the record books, with some of the retailers with July-ending quarters reporting this week. Of note, shares of Foot Locker (FL) are nicely higher today after reporting strong results. Overall, it has been a very good earnings season. Indeed, with 98% of the S&P 500 companies reporting, 68% have bested expectations and 10% have matched the consensus figures. The three sectors to deliver the strongest bottom-line growth were the healthcare, energy, and technology groups. - William 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 and other companies releasing July-period financials are taking center stage once again today. Reports were generally positive, although not universally so. On the bright side, investors appeared pleased with results and/or outlooks from grocer The Fresh Market (TFM), video game seller GameStop (GME), machinery company Nordson (NDSN), apparel, accessories, and footwear retailers Ross Stores (ROST), The Gap (GPS), and Foot Locker (FL), computer equipment company Brocade Communications Systems (BRCD), and salesforce.com (CRM), a leading provider of customer relationship management services. Indeed, all of these stocks are moving higher ahead of the bell, in response, with shares of TFM and GME showing considerable strength.
Conversely, Wall Street was disappointed with the latest updates from retailers Aeropostale (ARO) and ANN Inc. (ANN), software developers Intuit (INTU) and Mentor Graphics (MENT), and telecommunications equipment company Marvell Technology (MRVL). Most of these equities are indicating modestly lower openings this morning, although ARO’s losses are a bit more severe. – 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 bulls are continuing to surge forward, with the stock market now having been irregularly higher every day so far this week and having largely remained in the plus column for the past fortnight. It would thus appear that the softness encountered in late July and early this month is now a thing of the past. Improving economic fundamentals and better earnings trends, further optimism on the interest-rate front, and a sense that the current geopolitical situation, albeit fraught with danger, is unlikely to take this market down for very long, are fueling this market ascent.
Let's look at these issues one by one. On point, the economy continues to press forward steadily, with yesterday's succession of key reports featuring a drop below 300,000 in weekly jobless claims (making that three of the past four weeks in which this metric has fallen below that critical level), a modest increase in sales of existing homes during July, a further surge in the leading indicators (a gauge of future business activity), and a surprisingly strong reading in manufacturing in the greater Philadelphia area. This welcome combination, which featured better-than-expected economic results, strengthens our belief that the nation's gross domestic product will exceed 3% in the fast-concluding third quarter.
Armed with this news, and buoyed over the past month by largely better corporate earnings data for the second quarter, albeit with a few celebrated shortfalls along the way, stocks have marched higher. Then, there is the interest-rate outlook. Here, there is little doubt that rate will heads higher next year. The question is just when those pending increases will commence. The likely target date is mid-2015. But any overheating in the economy could advance the date by a few months, or more. We may get some light shed on this subject later today when Fed Chair Janet Yellen speaks on the subject at the annual international monetary conference being held at Jackson Hole, WY. Mario Draghi, the President of the European Central Bank, also is due to give his take on monetary issues at that symposium.
Most pundits believe that the Fed Chair will be true to her dovish views, but there could always be surprises. The market's steady march higher this week attests to the general expectation that Ms. Yellen will take an easy money stance and thus not rattle the financial markets. Should she assume a toughened position, there would be the potential for a harsh reaction by the financial markets. The next few hours will be instructive.
As to the markets yesterday, stocks rolled ahead at the outset of the trading session and never looked back--especially the Dow Jones Industrial Average. That blue-chip composite raced past 17,000 early in the session and tacked on some points thereafter for good measure. By the close, that index had retained some two-thirds of its earlier 95-point advance, finally closing 60 points higher on the day. The Standard and Poor's 500 Index added six points, securing an all-time high in the process, and ending the day less than eight points from the magical 2,000 mark. The NASDAQ, a relative laggard the past two days, also ticked up six points, after having been in and out of the black all day long. That index hit a 14-year peak. The small- and mid-cap indexes also rose, but, here too, the gains were modest. However, it was a decent session, overall, in a succession of better days. Now, the onus will be on the Fed to deliver. With the market at these elevated levels, there is less and less margin for error.
Looking ahead, we are seeing mixed overseas, with results out of Asia overnight again quite positive, as stocks headed higher, on balance, albeit with some weakness in Japan. But it is another story in Europe where the principal bourses are lower, especially on the Continent, where the Paris CAC-40 and the Frankfurt DAX are notably weaker. The London FTSE 100 is off just narrowly. And on our shores, the futures are likewise mixed, suggesting a wait-and-see approach pending the ebb and flow of the Jackson Hole conference. The market is overbought and due for some profit taking as we approach 2,000 on the S&P. Whether we will see such resistance today is up in the air at this point. Stay tuned. - Harvey S. Katz