After The Close - Early trading was defined by a divergence in the key stock indexes. Indeed, the Dow Jones Industrial Average started the day lower, as weaker-than-expected results from DowDuPont (DWDP – Free DowDuPont Stock Report) weighed on that index. On the other hand, the S&P 500 and NASDAQ trended higher, thanks to Facebook's (FB) strong showing. Then, through the early portion of the trading session, all three major averages started moving upward. The S&P 500 broke the 2,700 level, while the Dow broke even for a spell. These were partially aided by continued positive sentiment following the Fed’s call for patience regarding further interest-rate hikes. However, later in the session, the markets slowly tapered off, and reversed some of these early gains. All told, the Dow closed down just 13 points, while the S&P 500 was higher by around 23 points, and NASDAQ rose 99 points.
Additionally, market breadth was very positive as advancers outpaced decliners by a 2.4-to-1.0 ratio. The communications sector was among the strongest performers, as solid results out of Facebook and Charter Communications (CHTR) bolstered that sector. However, materials companies’ prices were among the weakest on the day, dragged down by DowDupont’s poor performance.
In commodity news, oil prices ended the day modestly lower, but capped off a month of solid returns. Meantime, gold and silver prices were slightly improved, and U.S. Treasury bond yields were lower. These moves were partially attributable to a flight toward safe-haven assets. Too, the VIX Volatility Index was lower, as demand for options protection was reduced.
Looking ahead, tomorrow will be a busy day for economic data. The ISM Manufacturing Index for January, construction spending in December, and non-farm payrolls for January are on queue to be released. Also, total vehicle sales for January are expected to be recorded.
Meantime, earnings season is in full swing. Energy-related Dow components, Chevron (CVX – Free Chevron Stock Report) and Exxon Mobil (XOM – Free Exxon Stock Report) are slated to report their latest quarterly results before the opening bell, while drug company Merck (MRK – Free Merck Stock Report) is also on tap. Too, e-commerce giant Amazon.com (AMZN) released earnings after the closing bell today. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
Before The Bell - The stock market, missing some key economic reports, which are still on hold following the end of the 35-day partial government shutdown, and at the time awaiting the Federal Reserve's FOMC decision due out later yesterday, began the middle session of the week strongly to the upside. In all, the Dow Jones Industrial Average quickly stormed out to a gain of almost 300 points. The catalyst for this good start was fourth-quarter earnings, most notably results from key Dow components. The Boeing Co. (BA – Free Boeing Stock Report) and Apple (AAPL – Free Apple Stock Report). Both issues jumped on news of healthy quarterly metrics.
Specifically, Boeing stock jumped almost 5% in the early going after the aerospace and defense giant posted better-than-expected quarterly results, including posting annual revenues of more than $100 billion for the first time ever. Shares of Apple also rose nicely after the tech icon reported a quarterly profit that narrowly beat estimates. Revenues also topped expectations, but iPhone sales fell short of targets. Earlier this month, that Dow component had cut revenue forecasts for the latest period, pointing to the business slowdown in China.
In addition to earnings, both those that have been reported and a large number still to come, the Street also was preoccupied with the FOMC meeting that concluded yesterday afternoon at 2:00 PM (EST). For the record, almost all pundits had been forecasting no interest rate increase this time around, and perhaps for the next few meetings. How dovish the Fed also had become likewise was being scrutinized. And, to virtually no one's surprise, the lead bank opted to keep borrowing costs unchanged. The market would be pleased with the central bank's approach, as stocks would build upon its strong edge after the meeting's conclusion.
Meanwhile, in other news, Automatic Data Processing (ADP) reported that its survey on private-sector payrolls jumped by 213,000 in January. That was well above the forecast of 178,000. Tomorrow, the Labor Department is scheduled to issue its monthly data on non-farm payrolls. Expectations are that the nation added 163,000 positions in the now-ending month, about half the gain tallied in December. The clear outperformance at ADP, however, could mean that the country outdid expectations in the upcoming survey. A key consumer sentiment report (from the University of Michigan) also is due tomorrow.
As to the market, it retained its stellar gains into the 2:00 meeting. At that time, the FOMC voted to keep interest rates unchanged and suggested it would be patient going forward. The Street liked that approach, and stocks would rally strongly into the close, with the Dow soaring past the 500-point advance line. The other indexes also did well. Our sense is that the pressure on the market last month, which was partly driven by rate fears, is now sufficiently in the rearview mirror. Meantime, the gains continued to come and stocks closed near session highs, with the Dow, boosted by earnings and the Fed, adding points on the day.
Looking out now to the week's penultimate session, we see that stocks were higher in Asia in the overnight hours, while in Europe, the bourses are showing spotty gains at this early hour. Also, oil prices are little changed and U.S. Treasury note yields, which fell back to 2.70% on the 10-year vehicle, are now at 2.67% this morning. Finally, on a day that will see additional earnings reports and some economic news, the U.S. equity futures are suggesting a ho-hum opening when trading resumes shortly. – Harvey S. Katz, CFA