After The Close - The stock market got off to a weak start this morning, and deteriorated on a much grander scale as the session progressed. In fact, by the close of trading, the major averages were at the low point for the day. Specifically, the Dow Jones Industrial Average was down over 1,033 points; the broader S&P 500 Index was off just over 100 points; and the NASDAQ was lower by 275 points. Market breadth indicated widespread selling, with decliners well ahead of advancers on the NYSE. All of the major equity sectors lost ground today, with considerable losses in the technology and consumer names. Meanwhile, the utility issues, while still lower, showed a degree of relative strength.
Elsewhere, traders received one main economic report this morning. Specifically, initial jobless claims dipped to 221,000 for the week of February 3rd, where a less favorable reading had been anticipated. It is possible that this claims report triggered worries that the Federal Reserve may be inclined to lift interest rates sooner rather than later. Tomorrow, we get a look at wholesale inventories for the month of December.
Meanwhile, the fourth-quarter corporate earnings season continues. Today shares of Tesla (TSLA) moved lower after the electric car manufacturer delivered better-than-anticipated results. Investors may have concerns about the company’s production schedule. In the financial area, shares of Prudential Financial (PRU) also slipped in price, even though the company put out a respectable report. It should be noted that sentiment was quite negative today, making it hard for corporations to impress.
Technically, the stock market pulled back sharply today. From here, it is unclear how much further the market might fall before the selling runs its course, and the bulls regroup. Often a point of capitulation, a sense of panic, or extreme negativity, will signal the beginning of a market bottom. - 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 - It certainly has been a hectic week for the stock market. To recap, after the release of the jobs report for January this past Friday, the stock market tumbled across the board, on consequent interest rate fears and the risk of higher inflation during the session. All told, the Dow Jones Industrial Average, which had been weak early in that five-day span, tumbled 666 points on Friday. However, that was just the start, as the market tumbled anew, and even more severely on Monday, with the Dow plunging by 1,175 points. In fact, at one point that composite had been off by nearly 1,600 points.
The stock market then fell anew on Tuesday morning, before the bulls stepped back into the fray. Their participation and a slight easing in Treasury note yields, helped the Dow and the rest of the market recover a bit. In all, the Dow jumped back 567 points. Then, just when it seemed as though the bottom would again fall out of the market yesterday morning, as the pre-market futures suggested a 300-point drop in the Dow at the open, some firming just before the outset of trading helped that index and most of the other composites quickly turn to the upside, following a halting start, albeit hesitantly.
The upturn then strengthened as the morning proceeded, and as we reached the noon hour in New York, the Dow was up by more than 300 points and the S&P 500 Index was better by 23 points. The NASDAQ's gain, meantime, was more muted. Still all was not good, as Treasury note yields again moved back above 2.81% in early afternoon. Clearly, some of the market's complacency has been removed, but not sufficiently for a serious correction to ensue. However, from its late-January peak to its February 5th trough, the Dow did fall by just over 10%. So, there was some notable, if thus far, short-term damage.
The market then moved back and forth over the next several hours, going from a near 400-point advance in the Dow just after noon to a breakeven performance in that index a little later. Meantime, the NASDAQ ranged from a 60-point gain to a similar-sized loss. Volatility was thus still in the picture, with minute-to-minute swings in the indexes still observable. This slightly less material back-and-forth also could be seen in the VIX Volatility Index, which earlier in the day had risen to more than 31, from a low of 21, was down more than 18% in late afternoon, before settling back to a smaller 8% down move, as stocks weakened anew for a time.
The late-afternoon softening occurred even as Senate Republicans reached a deal on the budget. However, an accord must still pass the House, where it will likely face tougher sledding. Meanwhile, one problem later in the day was that bond yields again rose, with the 10-Year Treasury note climbing to 2.84%, perhaps on fears that a budget accord will mean more borrowing. Meantime, the 2.84% yield is near the high for the past four years. The stock market then tried yet one more time to rally only to succumb to last-minute selling that left the Dow, the S&P 500, and the NASDAQ all lower on the day, with the latter's loss almost 1%.
Now, a new day dawns, and as we look out at the markets in Asia, we see that the key indexes were mostly higher in overnight dealings, while in Europe, the leading bourses are moving downward at this hour. Also, oil, a notable loser yesterday, is trending a little lower at this hour, while yields on the 10-year Treasury note is still at 2.84%. Already, the higher yields are pressuring mortgage applications, which were essentially flat in the latest week. Finally, U.S. equity futures are now suggesting a weaker open when trading resumes this morning. - Harvey S. Katz, CFA