After The Close - The stock market opened lower this morning, but managed to almost completely pare its losses as the session progressed. By the end of trading, the major averages were not far from the breakeven line. The Dow Jones Industrial Average was down six points; the broader S&P 500 Index was off less than one point; and the technology-heavy NASDAQ was lower by 15 points. Market breadth was neutral, with winners about even with losers on the NYSE. However, a few of the major market sectors managed to close in positive territory. Of note, some consumer and telecom names made progress. Meanwhile, the energy and basic materials stocks ended the session lower.
It was a quiet day for economic news. However, the Consumer Price Index (CPI) declined 0.1% during the month of December, suggesting that inflationary pressures are not yet a problem. The core reading edged up 0.2% for the month, as had been expected.
In the corporate arena, a few companies delivered quarterly reports over the past 24 hours. Specifically, shares of SYNNEX (SNX) gained ground after the business services company put out a solid release. Further, shares of Infosys (INFY) jumped after the India-based IT enterprise provided an upbeat outlook. Elsewhere, investors were buying shares of General Motors (GM) today, after the carmaker delivered encouraging guidance.
Technically, the stock market has been doing quite a bit better since the start of 2019. While little concrete progress has been announced, there is some sense that the U.S. Administration is now seeking to iron out its difficulties with China. Further, the Federal Reserve seems less hawkish, at this point. Meanwhile, some large financial institutions that had taken a defensive posture in December of 2018, may fear they could underperform in 2019, and are moving back into equities. – 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 stock market, up for four consecutive sessions, began yesterday's daily tug of war between the bulls and the bears trying to put on the so-called drive for five. However, even before trading began here, declines had been suffered in Asia, and the bourses were trending lower in Europe. Concerns about earnings, with the start of quarterly profit reporting season just days away, and worries about the intensifying partisan divide in Washington were two of the main issues at hand making a fifth straight win for the bulls seemingly an uphill struggle.
Indeed, stocks would open lower, with the Dow Jones Industrial Average quickly falling to a loss of some 175 points. The other indexes fell, too. Little in the way of materials economic news was issued, so the big story was earnings and individual corporate developments. On that count, there was a big drop in shares of giant retailer Macy's (M), as weak same-store sales comparisons took that issue down by nearly 20% as the morning progressed. Overall, though, the market did come back from this initial severe selloff. Profit taking in the wake of recent gains in the averages also was a factor in the early selling.
However, it is tough to keep the bulls down very long these days, and as we passed the 90-minute mark of trading, the averages had mostly turned positive, albeit grudgingly, at first. Likewise, there has been cautious optimism on trade, in the wake of the recent talks between the United States and China. Additional talks are planned, as a permanent solution to this vexing problem remains elusive. As to earnings, expectations for the fourth quarter are reasonably good, but there are worries going forward as GDP growth is likely to slacken over the course of 2019.
The market then rallied strongly, if briefly, as we headed into the first part of the afternoon, with the Dow climbing to a gain of just over 100 points. However, that surge proved to be brief, and stocks soon fell back into the red. However, that sojourn into negative territory also would be short-lived, and soon stocks were rallying anew, with the Dow again rising into the low-triple-digit range. The shifting sentiment reflected not only earnings worries, as not only Macy's and the entire retail group, bit also the airlines also came back to earth on profit worries.
Also vexing investors was the decision by the President to forego the upcoming world economic conference in Davos, Switzerland, in order to tend to the issues and fallout caused by the lingering government shutdown. That reminder of the dysfunction in Washington also held any material market gains at bay as the early afternoon proceeded. Finally, there were comments by Federal Reserve Chair Jerome Powell to consider. Mr. Powell opined that he was concerned about the growing amounts of U.S. debt, which is approaching $22 trillion and counting.
The stock market then would firm a little bit more, with the indexes all closing near session highs on hopes for a trade breakthrough and ongoing momentum from the recent turnaround in equities. Looking out to the upcoming session, we see that stocks in Asia were nicely higher in overnight action, while in Europe, the major bourses are trading with early losses. Also, Treasury note yields, up yesterday to a close of 2.73%, now are easing back and oil, which eked out another gain yesterday, is trading with early increases this morning. Finally, U.S. equities appear poised for an early setback following yesterday's further comeback. - Harvey S. Katz, CFA