Stock Market Today: February 20, 2014
After the Close - Perhaps it was a hint of spring in the air on the East Coast after a brutally cold and snowy winter that put investors in a good mood today, or maybe a couple of positive economic reports were stressed more than the weaker data. Whatever the case, the Dow Jones Industrial Average enjoyed a nice gain of 93 points and the NADASQ tacked on 30 points. The tone of the broader market was true to those major indexes, with about two stocks rising for every one falling on the Big Board.
True to form lately, the direction the economic tea leaves were pointing was not abundantly clear this morning, with softer-than -expected data on manufacturing in the Philadelphia region offset by a more favorable "flash" PMI reading from consulting firm Markit that indicated resilience in the broader U.S. manufacturing sector. Meantime, figures on inflation and the labor market were in line with expectations. The tipping point to the good for Wall Street might have been a solid January reading regarding the nation’s leading economic indicators, which pointed to steady growth, despite the drag of bad weather in recent weeks.
In terms of market sectors, it was a good day all around, although financial stocks did not enjoy the same degree of uplift that most other sectors did. Hints that interest rates may be on the rise could have been a factor. Mortgage giant Freddie Mac reported today that the average rate on a 30-year home loan rose to 4.33%, up from 4.28% last week. Rates remain extremely attractive for prospective homebuyers, though.
Among individual stocks, shares of high-end automaker Tesla (TSLA) shined today. The electric car maker reported better-than-projected fourth quarter earnings after last night’s closing bell and issued upbeat guidance for 2014. But, like the $70,000 price tag for one of its vehicles, Tesla stock may be too expensive for many investors.
Today’s session was also constructive for a number of stocks of mature companies that had sold off in recent days and weeks. Those included Dow-30 component Verizon (VZ – Free Verizon Stock Report), which enjoyed the benefit of an analyst upgrade, and shares of Pepsi Co. (PEP), which headed higher on word that institutional investors will continue to press for a breakup of Pepsi’s beverage and snack divisions.
On the down side, Wal-Mart (WMT – Free Wal-Mart Stock Report) stock, another member of the Dow, fell after the discounter reported weak fourth-quarter results and offered up a tepid outlook.- Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:00 PM EST - The U.S. stock market got off to a choppy start this morning, but is now firming up. At just past noon in New York, the Dow Jones Industrial Average is ahead 80 points; the broader S&P 500 Index is up seven points; and the technology-heavy NASDAQ is higher by 12 points. Market breadth is favorable, as advancing stocks are outnumbering decliners by a decent margin on the NYSE. Further, most of the market sectors are making progress. There is some leadership in the healthcare group, as the drug stocks are up nicely. The industrials are making strides, too, with gains in the heavy construction names. Elsewhere, the financial sector is lagging a bit today, owing to weakness in the mortgage-related issues.
Technically, the stock market has been making its way higher over the past two weeks, and may be in need of a pause. The S&P 500 Index is now not too far from 52-week high ground, and it may encounter some resistance at this level, especially given the sharp runup we have seen lately. Meanwhile, the VIX is retreating a bit, to just under 15, today. That may suggest that traders are feeling complacent, at least for now.
Investors received quite a few economic reports to digest today. Specifically, initial jobless claims for the week ended February 15th came in at 336,000, which more or less met the consensus forecast. Further, inflation does not seem to be a problem as consumer prices increased just nominally in January. Nonetheless, the economy may be a bit choppy in some regions. The Philadelphia Fed Survey came in showing a decline of 6.3 in February, where a gain had been expected. Tomorrow will be a light day for economic news, as the only major report due out will be existing home sales for January.
The fourth-quarter earnings reports continue to command attention. We recently heard from Wal-Mart (WMT - Free Wal-Mart Stock Report). That stock is trading lower, after the discount retailer issued weaker-than-expected guidance. Shares of Safeway (SWY) are up, after the supermarket operator put out a mixed report, but indicated that it might pursue strategic alternatives. Meanwhile, there was a bit of M&A activity in the news today, and that can sometimes help market sentiment. To wit, Facebook (FB) stock is down a bit, after the social media giant announced plans to purchase WhatsApp for roughly $19 billion. Some believe the offer is pricey. - Adam Rosner
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 -Earnings season is winding down, but there are plenty of issues to keep an eye on today.
For starters, one of the last remaining Dow members to report earnings, ubiquitous retailer Wal-Mart (WMT - Free Wal-Mart Stock Report), is off on weaker quarterly results. Meanwhile, tech behemoth Hewlett-Packard (HPQ) is set to release its fiscal first-quarter showing.
Elsewhere, electric car maker Tesla (TSLA) reported earnings after the closing bell yesterday. The showing was up handsomely versus the year-earlier numbers. A bounce in this stock appears probable for the open today.
In M&A news, social networking stalwart Facebook (FB) is getting a large amount of headlines for the purchase of a messaging service, WhatsApp Inc. The price tag is $16 billion in cash and stock, as well as $3 billion in restricted stock units over the next four years. The initial reaction to this deal may well be lukewarm, as the investment community digests the details of the pact. Facebook shares are set to open lower. -Erik M. Manning
At the time of this article's writing, the author did not have psoitions in any of the companies mentioned.
Before The Bell - The stock market began yesterday's session generally lower, firmed up notably in mid-to-late morning, and then gave back those uneven gains as the lunch hour unfolded in New York. Stocks then wove an uneven pattern throughout the afternoon, eventually closing broadly to the downside in a rather frenetic session, following a succession of daily gains over the past fortnight. There was nothing dramatic in the reversal, but it did take some small measure of froth from valuations.
The stock market was influenced initially by a much weaker-than-expected report on housing starts for January. Specifically, the Commerce Department reported that residences under construction totaled 880,000 units on an annualized basis for the first month of this year. That total was off 16% from the December estimate of 1,048,000 starts annualized. Expectations had been for a more muted pullback to 945,000 units. This latest total was one of the lowest for the past year.
However, stocks managed to shrug off that disappointment, largely because most economists believe that the current economic sloppiness, which has been repeated for a number of industries over the past few weeks, has been largely driven by the unusually poor weather thus far this winter. Many pundits believe that once the spring arrives, and the weather is presumably less of a factor, many sectors will successfully play catch up. We shall see. Also of note, the Labor Department reported that producer prices had ticked up a slight 0.2% in January, which was largely within the range considered healthy and did not spark much of a reaction on Wall Street.
So, armed with these twin reports, but unnerved by neither, the stock market quickly erased some small early losses, and within a half hour, or so, of the opening bell, the Dow Jones Industrial Average and the Standard and Poor's 500 Index were leading the large-cap indexes into the black--especially the Dow. The NASDAQ, though, held in negative territory, although less definitively so after the modest selloff at the outset.
Then, stocks continued to firm for a time, with the Dow climbing to a gain of more than 90 points at its late-morning peak. As the rally continued, the NASDAQ turned positive, albeit briefly. However, as the noon hour rolled in along the East Coast, the red arrows began to appear, and within minutes, the Dow had erased its earlier healthy gains, and turned a bit negative. A key catalyst for the mid-session reversal may well have been comments by a pair of regional Federal Reserve Bank Presidents to the effect that only dramatic events would alter the tapering schedule.
Such comments and the pending release of the Fed minutes from its last FOMC meeting at 2:00 (EST) then held the buyers at bay. Meantime, there seems to be some consensus on the fact that the monetary tapering will go on in an orderly fashion, most likely concluding later this year. When the Fed minutes did come out, though, there seemed to be some disagreement as to just when the bank would start to increase short-term interest rates, which now are near zero. That may have unsettled the bulls somewhat, too. Also, concerns about the emerging markets took some toll on the buyers, as did weakness in the steel stocks following a decision by the Commerce Department on Tuesday to not impose tariffs on imported steel pipe. U.S. Steel (X) fell sharply on that news losing just over 7% on the day. Big Steel had been a solid performer in recent weeks, climbing from the low 20's to above $31 a share. It is now back below $25. The metals stocks also backtracked, as gold prices broke their recent two-week winning streak.
By the close, the bears had wrested the reins from the bulls and stocks ended the session notably lower, led by the NASDAQ, which had been the weakest link throughout the session. That tech-laden index's final loss of 35 points underscored the relative weakness. The Dow, meantime, which was all over the place, posted a final loss of 90 points--for a swing of more than 180 points from peak to trough. The small- and mid-cap indexes also fared poorly on this up-and-down session.
As to the day ahead, the markets were notably lower overseas, held down by the report of weak manufacturing data in China and a sharp drop in consumer prices in France, and now seem poised to commence the upcoming session on our shores sharply to the downside, with the Standard and Poor's 500 Index futures off more than five points and the NASDAQ futures lower by 14 points. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.