After The Close - The U.S. stock market opened higher this morning, and was able to extend its gains through the afternoon. Notably, today’s advance erased the damage inflicted yesterday. Further, it was encouraging that the market managed to close higher, even as we head into a weekend in the summer. At the close of the session, the Dow Jones Industrial Average was up 123 points; the broader S&P 500 Index was higher by 20 points; and the NASDAQ, which assumed a leadership position, was ahead on 69 points. It should be noted that the Russell 2000 Index, which is composed of small-cap stocks, also rose sharply, and this suggests that investor sentiment was much improved. Too, market breadth showed widespread support for equities today, as advancers outnumbered decliners by a wide margin on the NYSE. Strength could be found in numerous equity groups. Specifically, the healthcare issues made solid progress, helped by gains in the biotech area. Also, the broader technology sector moved sharply higher.
Today’s rebound was quite notable. Once again, it showed that the bulls were willing to buy equities on the first sign of weakness. This type of behavior has been one of the foundations of the current bull market, and has made it hard for the bears to gain any meaningful control. It also points out that trading macro and political developments can be a hazardous strategy. While political unrest is disturbing and creates uncertainty, it is hard to predict just how these events will play out in the stock market. While yesterday’s selloff was troubling, it does not necessary seem that a full-scale correction is forthcoming. This outcome may have taken some traders by surprise this morning. Notably, the VIX retreated about 16%, to 12.26, suggesting that investors were feeling quite a bit better about the situation today.
Meanwhile, investors were willing to look past some lackluster economic news issued this morning. Specifically, the University of Michigan’s Consumer Sentiment survey came in with a preliminary reading of 81.3 for the month of July. This figure was a bit lower than had been expected. Too, the Conference Board’s report of Leading Economic Indicators showed an increase of 0.3% in June, while a slightly stronger number had been anticipated. - Adam Rosner
Finally, traders received numerous corporate reports this morning, as the second-quarter earnings season is now in full swing. For the most part the news has been encouraging.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:00 PM EDT - The major U.S. equity indexes are rallying off of yesterday’s event-driven selloff on international concerns as we hit the midday hour on the East Coast, with the buying intensifying in the last hour. Leading the charge higher is the NASDAQ, which are up on the strength of some big-name technology stocks, and the small-cap Russell 2000—the latter index has struggled in the prior few sessions, especially after Federal Reserve Chair Janet Yellen said that valuations in the small-cap markets look stretched. Investors should note that trading volume has been high thus far today, which may be a sign of some conviction on the part of the bulls. Overall, advancing issues are outpacing decliners by a sizable margin on both the New York Stock Exchange and the NASDAQ, to the tune of more than four to one on the Big Board.
The primary catalyst behind today’s rather encompassing buying is another round of mostly positive earnings reports from Corporate America. The second-quarter earnings season has been a constructive one thus far for equities and has helped to somewhat offset some unsettling news from Ukraine and the Middle East, which also has not provided any more headlines after yesterday’s negative press. On the earnings front, today’s big headline makers are Google (GOOG) and Honeywell (HON). The former is giving a nice boost to the technology stocks.
Meantime, we did get some more reports on the economy, but neither report tends to be an attention grabber. The leading indicators increased 0.3% in June, to 102.2, following respective advances of 0.7% and 0.3% in May and April. The positive reading was yet another indication of an economy that is expanding and one that may even accelerate somewhat in the second half of this year. The leading indicator data offset a somewhat disappointing July reading on consumer sentiment from the University of Michigan. Specifically, U.S. consumer sentiment dipped in early July, while an index of consumer expectations weakened for a third straight month. The index came in at 81.3, below both the consensus expectation of 83.0 and the final reading June reading of 82.5. However, not even the uninspiring consumer report is dampening the investment community’s spirits today.
Overall, it has so far been all up arrows among the top-10 sectors, with leadership being provided by the technology group. The financial, healthcare and industrial stocks are also in demand. As noted, the technology group and, to a lesser extent, the financial and healthcare stocks are keying the NASDAQ’s strong performance thus far today.
Looking ahead to the remainder of the trading day, we think it will take a big effort to knock the bulls out of the driver’s seat, especially when taking into account that trading activity usually slows down during the final few hours on your typical summer Friday. Barring any unforeseen breaking news from the contentious Middle East or Ukraine, which can never be fully ruled out given the escalating tensions in those areas, we think the positive earnings news will carry the bulls to the finish line. - William G. Ferguson
Stocks to Watch from The Survey– Second-quarter earnings season is in full swing, and investors are digesting a slew of reports this morning. The biggest disappointment came from semiconductor company Advanced Micro Devices (AMD), which released weaker-than-expected earnings and a lackluster outlook, especially compared with some of its peers. AMD stock is plunging ahead of the bell, as a result. Other equities moving lower in the premarket on earnings news include oilfield services provider Schlumberger (SLB), technology bellwether International Business Machines (IBM – Free IBM Stock Report), medical supplies company Cepheid (CPHD), and financial services provider Bank of New York Mellon (BK).
Conversely, Wall Street is reacting favorably to earnings reports from diversified manufacturer General Electric (GE – Free General Electric Stock Report), Internet giant Google (GOOG), and apparel company V.F. Corp. (VFC). All of these stocks are indicating higher openings this morning, as a result.
Elsewhere, U.K.-based drugmaker Shire has agreed to be acquired by industry peer AbbVie (ABBV) for roughly $55 billion after a period of back-and-forth negotiations that have been closely watched by investors. ABBV stock is down slightly on the news. – Matthew E. Spencer
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, following an in-and-out Wednesday, started yesterday's session with a notable downward bias. To be sure, the relentless bulls did try to rally the market in mid-morning, but their efforts soon proved unsuccessful, as equities softened again near lunch time.
Indeed, by mid-session, Wall Street's latest rally attempt had clearly run out of steam. Behind the moderate morning selloff was a succession of inconclusive economic reports, including releases affirming declines in housing starts and building permits, better results for jobless claims (as filings fell to a nine-week low), and a decent regional manufacturing survey put out by the Philadelphia Federal Reserve.
In part, though, investors were probably looking for any excuse to take money off of the table following the solid rally by the equity market from June through early July. So, profit taking had some impact. Also, there were fresh concerns about the geopolitical situation. To wit, we have the latest worries coming out of the strife-torn Middle East, there is news of the imposition of tightened sanctions against Russia by the United States, and there is the breaking story that a Malaysian airplane was shot down over the war-torn regions of Ukraine, killing all 298 on board. Meantime, the aforementioned imposition of sanctions had earlier helped to take the measure of Russia's stock market. Such occurrences also did not help the mood among investors here. It is not hard to get sentiment to turn on a dime in the wake of a near-relentless climb higher. And it did yesterday.
Indeed, with little material impetus to renew their buying, traders took the U.S. stock market somewhat lower into the noon hour, with the Dow Jones Industrial Average tumbling to a 90-point loss at that time. The NASDAQ, under pressure from some weakness on the tech side, posted a mid-session decline of some 45 points, while the small- and mid-cap indexes posted fairly good-sized reversals, as well. The market, however, did not stay down there all that long, and there was some selective lunchtime buying, which helped to stem the downward tide for a time. In fact, within minutes, traders had trimmed the Dow's deficit by almost 50% and ate into a chunk of the NASDAQ's earlier loss.
However, the bulls couldn't sustain the midday rally and stocks were soon on the decline again, albeit not as aggressively as before, at least not until very late in the session. All told, though, the tone was decidedly negative throughout, with many more stocks losing value than gaining ground on both the Big Board and the NASDAQ. Also, all of the 10 leading groups were tracking lower in this general selloff, which continued through the afternoon hours, finally intensifying as the session wound down to the close--and in a big way.
As to earnings news, after the close, technology icon International Business Machines (IBM - Free IBM Stock Report) weighed in with its results, and that news was decent on the bottom line, but it was less than compelling on the revenue side, so that stock is tracking lower today in the pre-market. Also, we have just heard from diversified industrial giant General Electric (GE – Free GE Stock Report). That stock, however, is edging higher in the pre-market. Second-quarter profit reports have been good, on balance, and that has lifted the spirits of investors--that was until the latest erosion in the international situation.
All told, then, by the close, the Dow, buffeted by across-the-board late weakness was off by 161 points (at its nadir, it was lower by just over 170 points); the NASDAQ, under pressure throughout the day as well, lost 63 points; and the Standard and Poor's 500 Index was off by 23 points. The S&P Mid-Cap 400 and the small-cap Russell 2000 also moved to the downside, and aggressively so. There were few pocket of strength, save for the gold stocks, which often firm up in a time of international turmoil.
Now, a new day begins, and the shakiness of the global situation had stocks in Japan down sharply overnight, while in Europe thus far this morning, the bourses are trying to stabilize. Finally, on our shores, the futures are now in the plus column, especially on the NASDAQ, which is some 12 points to the good, at this time. – Harvey S. Katz