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After The Close - The futures markets started lower today. Apple (AAPL Free Apple Stock Report) preannounced a reduction in quarterly sales estimates from its prior guidance for its calendar fourth-quarter results. This caused the indices to sink in early trading, given Apple’s prominent position in the Dow Jones Industrial Average, the S&P 500, and the NASDAQ. The markets accelerated the slide during the trading session, as a weaker-than-expected ISM manufacturing index exacerbated worries about a global slowdown. This price action occurred despite a stronger-than-expected outcome on the Automatic Data Processing (ADP) jobs report, and caused the Dow to drop in mid-morning to session lows. The indices did reach an oversold condition and moderated their losses for a time. However, this action was short lived and the indices trended lower after the initial bounce, closing near the lows of the day. All told, the Dow was down by 660 points, the S&P 500 slid 62 points, and the NASDAQ fell 202 points.

Though the whole market was lower on the day, breadth was rather narrow, as decliners only outpaced advancers by a 1.3-to-1.0 ratio. The interest-rate sensitive REITs were among the best performers, while technology-related stocks were among the weakest. This sector was likely dragged down by Apple’s underperformance.

In commodity news, crude oil prices were slightly higher today, likely aided by reduced supply coming from OPEC nations more than offsetting global demand concerns. Meantime, gold and silver prices rose on the day, while U.S. Treasury bond yields fell. These were boosted by a flight to safety. Too, the VIX Volatility Index was higher on the day, as demand for option protection rose.

Looking ahead, tomorrow’s trading will likely be affected by a few key economic reports. These include the nonfarm payrolls and unemployment rate for December, which is still scheduled for release. Too, oil and natural gas prices will likely be moved by the Energy Information Administration’s report on inventories. However, earnings news will likely take a backseat, suggesting that trading will be focused on global economic data.  - John E. Seibert III

At the time of this article's writing, the author had positions in AAPL.

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11:00 AM EST - Yesterday, it was a decline in manufacturing activity in China that set into motion a furious morning selloff in the U.S. stock market. In all, that downdraft would throw the Dow Jones Industrial Average into the minus column by some 400 points before a notable comeback would gingerly lift the major indexes back into the green by day's end.

Today, there seems likely to be no repeat of that late recovery. And once again, it is manufacturing that is rattling investors on our shores. Only this time, it is materially slower growth in U.S. manufacturing that is taking the measure of Wall Street's few remaining bulls. But that is not the only headwind.

As to manufacturing, the Institute for Supply Management reported that its purchasing managers indicated that its closely tracked industrial survey came in at 54.1 in December. That is still in expansion territory, but is well down from November's 59.3 reading and expectations for this latest month of 57.9. 

This setback was especially unnerving as it came just one day after the dour release in China and also as much in the way of U.S. economic news has been absent due to the lingering government shutdown. But that is not all, as tech icon Apple (AAPL Free Apple Stock Report), already under pressure, noted that it would come up short on first-quarter revenues.

So, the market is plunging. In all, as we reach the 90-minute mark of trading, the Dow is off by 650 points (pushed lower by a $15.50-a-share drop in the aforementioned Apple). Also, the S&P 500 Index is now down 60 points; and the NASDAQ is in the red to the tune of 185 points.  - Harvey S. Katz, CFA

At the time of this article's writing, the author had positions in AAPL.

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Before The Bell - As far as Wall Street is concerned, the new year looked as though it would start out in much the same way that the old one ended. That is, with the stock market moving decidedly lower. On point, the equity market futures on our shores indicated a notably lower opening for the first trading day of 2019, with a surprise drop in manufacturing activity the principal culprit. In fact, the Dow Jones Industrial Average quickly fell to a loss of some 400 points, driving that 30-stock composite below 23,000 for a brief span. Then, after remaining in the minus column for a couple of hours, the deficit started to shrink.

The comeback then would continue into the first part afternoon, with the Dow and the other indexes all going green by the end of the lunch hour, with the recovery led by the financial, energy, and technology shares. Also, as often is the case during the first session or two of the new year, a number of last year's big losers rallied notably after late-year tax-loss selling had been exhausted. This out-of-favor 2018 group would include General Electric (GE), the erstwhile Dow component, and Goldman Sachs (GSFree Goldman Sachs Stock Report), a current member of that select 30-issue composite.

Meanwhile, the market had precious little economic or political news to digest on our shores, so the depressing business news out of China could grab some headlines early. What concerned investors about the China miss was that this was the first monthly drop in manufacturing in more than a year and a half. Also of note, the euro-zone manufacturing survey is weak. We will have the release of our own purchasing managers survey on manufacturing a bit later this morning. Here, a somewhat lesser rate of increase is the consensus expectation.

Also, of note, stocks fell initially on a report in a leading newspaper that the U.S. Trade Representative to China had indicated to friends that he would advise the President against accepting empty promises from China. Recent comeback rallies in the market often have followed indications of a thaw in U.S.-China trade relations. The early afternoon recovery would then run into some headwinds as we moved inside the final two hours of trading, with the Dow again turning negative, but with none of the fury that had been exhibited earlier in the day. This choppy performance follows the worst December for stocks since 1931.

The afternoon would bring on a modicum of additional selling for a time, with the Dow's loss staying in the 50-100-point range through much of the late afternoon. The S&P 500 also would go negative, before firming at the close, as would the NASDAQ. The smaller-cap indexes held in the loss column, but gingerly. First-day adjustments would help, but the same problems that would drag the stock market down late in the year would again plague sentiment and performance on this first day of trading in 2019. It would seem that the dip philosophy would go just so far, and even with some late firming, the market would end matters mixed.

All told, the Dow Industrials would end matters up by 19 points; the S&P 500 Index would add three points; and the NASDAQ, with this late push, would climb 31 points. Only the S&P Mid-Cap 400 would decline. Interestingly, this was the second time in as many sessions that a last-minute buying burst would cause the market to post green arrows. Overall, there were more gainers than losers on the Big Board, while in other markets, yields on the 10-year Treasury note eased further falling back to 2.66%, as the two-year note yielded more than its five-year companion in a yield inversion.

Following this unprepossessing performance, we see that shares in Asia were lower overnight, while in Europe, the Continent's bourses are so far tracking downward, as well. Also, oil is down again and Treasury note yields are falling once more. Meanwhile, as investors await the ISM manufacturing data, turn out at 10:00 AM (EST), we see that our equity futures are poised to open the current session with steep losses following a revenue warning from Apple (AAPL Free Apple Stock Report). We shall see where they go from there. Stay tuned. – Harvey S. Katz, CFA

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