After The Close - The equity markets put in a weak performance today, as concerns about rising interest rates resurfaced. Specifically, traders reacted to remarks earlier in the day from the new Federal Reserve Chairman, Jerome Powell, suggesting that an improved economy and signs of inflationary pressure might support a tighter monetary policy. At the end of trading, the Dow Jones Industrial Average was down 299 points; the broader S&P 500 Index was off 35 points; and the NASDAQ was lower by 91 points. Market breadth underscored the weak performance today, with losers well ahead of winners on the NYSE. All of the major market sectors lost ground, with steep losses in the consumer stocks and in the utility issues.
Investors had a couple of notable economic reports to sift through this morning. Specifically, durable goods orders dipped 3.7% during the month of January, after rising modestly in the month of December. Meanwhile, the Conference Board’s Consumer Confidence Index increased to a reading of 130.8 for the month of February, easily exceeding analyst expectations. Tomorrow we will get a look at the second estimate for fourth-quarter GDP. The latest monthly pending home sales figures will also be released.
In the corporate arena, many companies posted their financial results today. Of note, shares of AutoZone (AZO) traded lower in response to a weak report. Shares of Fitbit, Inc. (FIT) also sank after the wearable device maker put out a disappointing release.
Technically, the stock market pulled back quite a bit today, after yesterday’s advance. However, the broad index still remains above its 50-day moving average (located at about 2,735) and the rally that commenced about two weeks ago probably remains intact, for now. - Adam Rosner
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 stormed out of the gate yesterday morning, following strong gains this past Friday, and after constructive sessions in Asia and Europe earlier in the day, to send stocks meaningfully higher at the outset of trading. Traders thus once more sought to retrace the rest of the market's decline earlier this month, as many such participants looked ahead to a new month and a new set of critical economic and corporate reports. Also, March will bring the next FOMC meeting, where the Federal Reserve is very likely to raise interest rates one more time.
Meanwhile, the strong market tone continued through the morning, with the major industrials leading the way on the Dow Jones Industrial Average, where a triple-digit point gain was sustained throughout the morning and into the early afternoon. In fact, save for some momentary moderation in mid-morning, when a-better-than 200-point rise in that index eased back to a little more than half that amount, stocks stayed firm, and that respite, as noted, was brief, and with the economic signals still solid, on average, the market retained a healthy underpinning.
The market upturn strengthened some more into the afternoon, even though data issued in the morning from the U.S. Commerce Department showed a sharp drop in sales of new homes during January. Housing metrics, in fact, have been uneven recently, with existing home transactions also declining last month. But this weakness is more apparent than real, as housing inventory remains insufficient to meet demand. Perhaps a better indicator of real housing demand is furnished by price points, which remain strong.
The stock market then continued on its merry way in the afternoon, with not even the slightest hint of profit taking to dent the advance. The gains, in fact, continued to build, so that as we neared the close, the Dow's gain topped 400 points briefly. All the indexes participated in the dramatic upturn. In all, by the close, the 30-stock blue chip composite's surge had reached more than seven hundred points, combined, for the last two sessions. It was a veritable buying panic.
When all the books had closed, the Dow was up just shy of 400 points, enabling that index, and the S&P 500 to have regained all but 3% of the correction suffered early this month. On the whole, while just about all groups participated in the buying surge, the gains were led by the banks and technology categories. Few stocks or sectors failed to partake in the latest advance. So, as we head into the penultimate session of the month and one day ahead of the latest revision in fourth-quarter GDP, we see that the market is back in full buying mode.
As to the session ahead, and after yesterday's fireworks, we see that stocks in Asia were mixed in overnight trade, while in Europe, the leading bourses are moving lower, at this hour. In other markets, oil is off pennies a barrel in New York and yields on the 10-year Treasury note, which were flat at 2.86% yesterday are now passing hands at 2.87%. Finally, the U.S. equity futures are suggesting a mixed to weaker open at this time. – Harvey S. Katz, CFA