After The Close - The U.S. stock market put in a choppy, and somewhat directionless, session today. At the close of the trading, the Dow Jones Industrial Average had advanced 20 points; the broader S&P 500 Index was up one point; while, the technology heavy NASDAQ finished off nominally. Market breadth suggested a somewhat negative bias to today’s trading, as declining stocks outnumbered advancers by a decent margin on the NYSE. The equity sectors were also mixed. The basic materials issues were quite strong, thanks to gains in the metals and mining names. Also, the healthcare group made progress, thanks to sizable advances in the biotechnology area. In contrast, the utilities saw quite a bit of selling. Notably, the utilities, like other high-yielding issues, tend to be interest-rate sensitive. The utilities had been quite strong during the first half of the year, so, it remains to be seen if traders might be rotating into new sectors now that the third-quarter has begun.
In general, stocks have been holding up well. It should be remembered that markets do not advance every day, without small periods of consolidation. Notably, while stocks have moved sideways at times lately, we have seen very few concentrated bouts of profit taking and no panic selling. For the most part, the market has been quite orderly. However, valuations are high, and equities may need a more definite catalyst to break into higher ground.
Meanwhile, traders received some encouraging economic data this morning. However, for whatever the reason, this information failed to produce another rally. Specifically, the ADP (ADP) Employment report showed that 281,000 jobs were added to the private sector during the month of June. Given the trend lately, many traders may now be guessing that the government’s June employment figures will come in ahead of expectations. That market moving release is due out tomorrow morning. It should be remembered that tomorrow the stock market will close early, as we kick off the three-day holiday weekend.
Finally, it has been a quiet day for corporate reports. Last night, Paychex (PAYX) a leading payroll processor, posted decent fourth-quarter results. However, traders were not overly impressed, and that issue slipped a bit on the news. Today, Constellation Brands (STZ) shares moved up, after the beverage maker put out an encouraging release. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:05 PM EDT - Stocks today are following up on yesterday’s big gains in modest fashion, at least among most of the major larger-cap market averages. The gains are not fully reflected in the broader market, though, as decliners are outpacing advancing stocks by a 17-13 margin on the New York Stock Exchange.
The morning started with very uplifting news from payroll giant Automatic Data Processing (ADP) that the number of private sector jobs advanced 281,000 in June. That was the largest tally in 18 months, and augurs well for a strong showing when the government releases its monthly employment report tomorrow morning at 8:30 (EDT).
Thursday’s big jobs report comes a day ahead of schedule, owing to the Fourth of July holiday on Friday. In it, economists are anticipating a gain of more than 210,000 jobs. The actual figure will be closely watched following the first-quarter backsliding in the economy, when the nation’s GDP fell 2.9%.
While the ADP report initially provided the bulls with some ammunition to take stock prices higher, somewhat weaker-than-expected data on May factory orders issued not long after the opening bell was less heartening.
In terms of sectors, there is some leadership being provided by tech stocks and shares of basic materials companies, with steel stocks in the vanguard of the latter group.
On the downside, utilities are off most notably. The utilities sector has had a big year thus far in 2014, with bond yields falling pursuant to the weak first-quarter GDP. Utilities are the stock-market cousins of bonds, and benefit from falling long-term interest rates. Today, though, the yield on the 10-year Treasury is inching higher, and there may be some sector rotation into more economically sensitive stocks.
In corporate news, shares of GoPro (GPRO) are down for the first time since the stock’s IPO last week. Shares of the video-camera maker had doubled in less than a week of trading, so some profit-taking seems normal.
Shares of banking giant JPMorgan Chase (JPM - Free JPMorgan Stock Report) are off a bit following word that its CEO Jamie Dimon has throat cancer. However, Mr. Dimon is expected to work through the illness. We sincerely wish him a speedy recovery.
In other markets, oil prices have recovered some of the day’s modest losses after a bigger-than-expected drop in crude stockpiles. But oil prices are not the issue they were a week or two ago, when fears that fighting in Iraq would threaten more of that country’s oil supplies.
Heading into afternoon trading, the market’s tone is muted. - Robert Mitkowski
At the time this article was written, the author did not have positions in any of the companies mentioned.
Stocks to Watch from The Survey – Corporate news remains fairly light this morning, although there are a number of stocks moving notably higher ahead of the bell. Shares of Rackspace Hosting (RAX) started to gain steam after news reports surfaced that the cloud computing company may be close to going private. In May, Rackspace unveiled that it had hired investment advisors to help it explore various strategic options. The stock of Constellation Brands (STZ) is also indicating a nicely higher opening this morning, after the wine, beer, and spirits company released better-than-expected May-period results and issued upbeat guidance. Investors were not as impressed with May-quarter financials from Paychex (PAYX), however, and shares of the payroll accounting services provider are down slightly in the premarket, as a result. – 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 second half began with little resemblance to how the opening six months commenced--at least for the stock market. To wit, after Wall Street began 2014 poorly, with a fairly sizable pullback in January, before closing the half with moderate gains, it saw the just-started second half get under way with a strong rally--pushed forward by a welcome report on manufacturing activity in China, the world's second largest economy, and data showing further moderate improvement in manufacturing stateside.
Specifically, the market, underpinned with those solid surveys on manufacturing activity, seeming optimism about second-quarter earnings reports--which will hit Wall Street rather shortly--and relief that there were no further ill tidings from such hot spots as Iraq and Ukraine, rose decisively yesterday, with the Dow Jones Industrial Average and the Standard and Poor's 500 Index surging to record highs of just under 2,000 for the latter and modestly below 17,000 for the Dow. It was that blue chip index's first venture to the cusp of that psychologically important level ever. Just for good measure, the NASDAQ outperformed both indexes, as it climbed ever closer to 4,500. And although that would not represent an all-time high, it would clearly be a 52-week peak. The all-time high on the NASDAQ is above 5,100.
Meanwhile, the stock market keeps climbing, shattering one record after another. In large part, we sense, this persistence reflects the fact that there are very few areas that can compete with stocks at this time, especially given the historically low level of interest rates now in place. Fixed-income instruments, as such, are just not serious competition for equities, and have not been for years. Of course, there also is the fact that earnings are continuing to perform nicely, on average, the economy is now holding its own, and global events, albeit quite worrisome, are not having all that much impact on our shores--as yet. The better manufacturing data out of China were just more icing on the cake.
Our belief is that stocks are in a real comfort zone. And the business reports coming out are not proving disruptive in the least. For example, the rally that took hold yesterday was helped along by not only the first gain in manufacturing in six months in China, but, as noted, by decent report on our shores on June manufacturing. Here, the Institute for Supply Management noted that its survey on industrial activity rose in June for the 13th straight month, holding at a modestly expansionary 55.3. True, that was off nominally from May, when it had registered 55.4, and it was a bit less than the consensus forecast of 55.8, but it was an encouraging report, nonetheless. Meanwhile, going forward, we will be looking at a host of issuances tomorrow morning, when we will get information on weekly jobless claims, the monthly surveys (for June) on non-farm payrolls and the accompanying unemployment rate, and the June release on non-manufacturing activity from the Institute for Supply Management.
These reports, fewer profit warnings thus far for the second quarter than has been the case recently, and an estimated 5.1% rate of earnings growth for the just-completed period are all helping the stock market, at present. Armed with this combination of favorable trends, equities have continued to push higher at a fairly steady pace. Of course, as the market ascends, and valuations get frothier, there is greater risk. But in the absence of any overt tightening by the Fed, it is hard to see a scenario, save for calamity abroad, which would send investors scampering for cover.
Thus, it was a good way for the bulls to get the second half rolling. In all, the Dow added 129 points, to end the session at 16,956. Meanwhile, the Standard and Poor's 500 Index rose 13 points, to close at 1,973, and the NASDAQ jumped 50 points, bringing that composite up to 4,459.
Looking ahead to a new day now, we see that stocks were generally higher in Asia overnight, led by a 0.3% rise in Japan's Nikkei, while stocks in Europe are now extending their gains from yesterday. At that time, the bourses on the Continent had notched their best showing in two months. Finally, our futures are likewise pointing higher with less than an hour to go before the start of the new trading session, as those long the market seek to extend their latest winning streak. As to other news, cloud computing firm Rackspace Hosting (RAX) is seeing its stock spike upward to the tune of some 10% on indications that it might try to go private. Also, Automatic Data Processing (ADP) has just reported that private-sector payrolls jumped by 281,000 last month; an increase of some 210,000 had been expected. In May, such hiring was just 179,000. The strong tally could augur well for the report tomorrow on U.S. job creation, overall. Stay tuned. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.