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After The Close - After a difficult conclusion to trading last week, punctuated by Thursday’s outsized setbacks for all of the major indexes, those averages partially retraced some of the losses today. What initially started as some selective bargain hunting in an up-and-down trading session, eventually morphed into a broader rally. The recently battered bull showed fight, and the market breadth, which was mixed at the halfway point of trading, moved in favor of the advancers on both the New York Stock Exchange and the NASDAQ. At the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index were 76, 31, and 14 points higher, respectively.

The most encouraging aspect of today’s performance was the buying of the cyclical stocks, which were hit hard last week on fears that the Federal Reserve might raise interest rates earlier than expected—though a decent, but slightly weaker-than-expected, report on employment and unemployment on Friday may have eased the growing concerns of an earlier-than-anticipated interest-rate hike. Not surprisingly, the S&P 500 Volatility Index (or VIX), also known as the “fear gauge,” retreated notably. The sense of calm today on Wall Street was much needed after last week’s dour finish for the equity and bond markets.

The cyclical stocks—though they did provide leadership—were not the only strong performers today. All of the top-10 sectors, with the only exception being the utilities, finished in positive territory. Speaking of the utilities, the group, which hit an all-time high on June 30th, is down around 8% since that peak. Today, the biggest winners were the energy, consumer discretionary, basic materials, and technology issues. In the technology space, a notable mover was The Price Line Group (PCLN).

As noted, we think today’s market performance was a case of bargain hunting after last’s week poor showing, which saw the broader S&P 500 Index fall almost 3% for the five-day stretch. There was no major news on the U.S. economy and the earnings beat did not provide much of a boost, but investors were pleased to hear that a struggling Portugal bank had secured a bailout over the weekend. If investors were truly focused on earnings right now, which has, for the most part, been rather constructive, we probably would not have witnessed last week’s sharp selloff. One area where there was minimal buying interest was the airline industry. Most of the big name airline stocks were lower after one of the major players released some mixed data this morning.

Looking ahead to tomorrow, we will get an important update on the economy when the Institute for Supply Management (ISM) releases its latest reading on nonmanufacturing activity. Given the importance of the consumer sector to the nation’s economic output, the services sector data should be closely watched by the investment community. Last Friday, ISM’s companion report on manufacturing activity made for good reading and, along with the aforementioned modestly reassuring report on the job market, may have helped stem the market’s losses. With earnings season rapidly drawing to a conclusion—only four Dow-30 components have yet to report their latest quarterly results—investors will probably turn their attention to the business beat in between the next musings from the Federal Reserve. Investors, though, should note that entertainment giant Walt Disney (DIS - Free Walt Disney Stock Report) is scheduled to release earnings after the close of trading tomorrow. Shares of Disney finished nicely higher today after reports surfaced that its latest movie release, “Guardians of the Galaxy,” did very well at the box office this past weekend. Overall, though, it has not been a good summer at the movie theaters. – William Ferguson

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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12:30 PM EDT - The U.S. stock market is putting in a mixed session today. At just past noon in New York, the Dow Jones Industrial Average is down 14 points; but the broader S&P 500 Index is up a point; and the NASDAQ is higher by 12 points. Market breadth shows a divided session, too, as declining stocks are just ahead of advancers on the NYSE, and on the NASDAQ. A few sectors are moving higher. Specifically, there are gains in the consumer and technology issues.  In contrast, the utilities are declining sharply.

The stock market, which suffered a sharp one-day decline late last week, seems to be taking a pause today. Notably, the selling last week was not entirely unexpected, given that the market had staged a large rally in the prior months. The situation seems to have stabilized, at least, for now. But, additional time, and some further consolidation, may be needed before the market resumes another meaningful advance.

Investors received no notable economic reports this morning. Further, the lack of news may be contributing to today’s directionless quality. Tomorrow, things should pick up a bit, as factory orders for the month of June are due to be reported. Also, the ISM Non-manufacturing Index for July is slated to be released. Meanwhile, there were some positive developments overseas, worth mentioning. The banking problems in Portugal seem to be under control, at least temporarily. This is important, as the financial problems in Europe had weighed heavily on the U.S. equity markets some time ago.

Finally, traders received quite a few earnings reports this morning. For one, Michael Kors (KORS) stock is headed lower, after the apparel maker provided a weaker-than-expected outlook. After the closing bell, we will hear from American International Group (AIG). That stock is up slightly so far today. - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Stocks to Watch from The Survey A group led by financial services provider Goldman Sachs (GS - Free Goldman Sachs Stock Report) is in talks to invest in instant-messaging developer Perzo as an alternative to the widely used Bloomberg terminal. The HBO network, a subsidiary of multimedia giant Time Warner (TWX) is exploring ways to expand its Web-based TV service to nonsubscribers in more countries. Meanwhile, petroleum producer Continental Resources (CLR) has offered to pay taxes and make royalty payments to the state of North Dakota on natural gas it burned off. Media Conglomerate Walt Disney Co. (DIS - Free Disney Stock Report) cheered the highly successful debut of its film Guardians of the Galaxy, which ruled the box office over the weekend. After 18 months of wrangling, retailer Amazon.com (AMZN) has struck a new deal with Kensington Publishing Corp. – Sharif Abdou

At the time of this article’s writing, the author did not have positions in any of the companies mentioned. 

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Before The Bell - The stock market, fresh off an eye-catching retreat last Thursday of more than 300 points in the Dow Jones Industrial Average on Federal Reserve-related interest-rate fears, appeared set to do an encore on Friday. After all, stocks in Asia and across Europe, which have their own woes, were all decisively lower in the hours before the markets opened on our shores. Add in concerns about what the all-important statistics on non-farm payrolls for July would show upon their release at 8:30 (EDT), and we seemed to be headed for another rout of the suddenly defensive bulls.

However, the payroll report and accompanying unemployment figures did not show the expected strength that would have led to a possible rise in interest-rate fears. Instead, the gain in new jobs was held to a decent, but not overly inflation-inducing, 209,000. A gain of 234,000 had been the consensus forecast. At the same time, the jobless rate rose from 6.1% in June to 6.2% last month. A flat-to-nominally lower unemployment rate had been expected. Meantime, revisions in payroll growth for both May and June were positive, but not alarmingly so.  

Overall, the bulls seemed pleased with this ho-hum jobs increase, as there would appear to be less urgency to lift borrowing rates sooner rather than later. Our sense is that the Federal Reserve might yet keep to its schedule of perhaps mid-2015 to commence a readjustment in its rate policies. Armed with these employment metrics, and with some benign data on both personal income and consumer expenditures for June, which were released at the same time, the stock market headed cautiously higher at the outset. But the bulls could not keep this tepid rally attempt going for very long, and within a half hour, or so, the market had resumed its descent--and aggressively so. At the day's low, the Dow had retreated by some 125 points. This meant that on top of Thursday's 317-point rout, the 30-stock blue-chip composite had been pummeled by more than 440 points in little more than a session. That certainly was not comforting to those long equities. 

However, when the losses did not mushroom, the bulls stepped in, albeit hesitantly, and the suggested second sharp retreat in as many sessions did not occur. Still, the comeback was muted and halfhearted. Also, playing a role in the day's downward action was a better-than-expected showing by the nation's manufacturing sector, where more than a three-year high was tallied in that critical industrial category. Finally, auto sales reached their best monthly level in eight years. Accordingly, the stars were mostly aligned for the U.S. economy. That series of releases, along with Wednesday's 4.0% jump in second-quarter GDP, and Thursday's report of a pickup in wage inflation, raises the possibility that short-term interest rates (which the Fed controls directly) could start to increase a little earlier than the middle of 2015. Still, whatever the exact timing of those prospective rates hike, our thinking is that such moves will be gradual and thus not disruptive to the maturing business expansion.

Still, Wall Street does not like uncertainty, and with such rate fears hanging over the stock market, it is logical that some quick profit taking has taken hold. Keeping the past two sessions in perspective, though, Friday's losses, which included declines of 70 points in the Dow and 17 points in the tech-heavy NASDAQ, the damage to the bullish cause has not been all that much--especially with the Dow still above 16,500. As to the Standard & Poor's 500 Index, the drop of six points, pushed that index down to 1,925, leaving it 75 points below the much-hyped 2,000 mark. The failure thus far to break through that psychologically important level (that index has so far peaked at 1,991) could be a problem. The inability to ascend such technical barriers can create short-term vulnerability--especially in a somewhat extended and nervous market.

Meanwhile, looking ahead now to a new week, we see that a pair of rather important monthly releases are on the docket, beginning tomorrow with the issuance of the survey for July on non-manufacturing activity. This companion report to the aforementioned manufacturing survey is expected to show a further increase for last month. Then, on Wednesday, we will get a look at the latest trade gap data. As to the outlook for the markets in the day ahead, we find that stocks in Asia were generally lower overnight, while they are showing more of a mixed pattern in Europe so far this morning, led by gains in the London FTSE and the Paris CAC-40. Our futures, meanwhile, are nicely positive, with the S&P 500 Index futures ahead by a half dozen points, while the NASDAQ futures are now showing a gain of some 14 points. So, that would suggest we could see some bargain hunting at the outset of the trading day.   - Harvey S. Katz

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.