After The Close - The U.S. stock market opened sharply lower this morning and plunged further through the afternoon. At the close of the session, the Dow Jones Industrial Average was off a staggering 317 points; the broader S&P 500 Index was down 39 points; and the technology-laden NASDAQ had surrendered 93 points. The selling was widespread, as declining issues outnumbered advancers by roughly ten to one on the NYSE. Furthermore, all of the major market sectors closed deeply in negative territory. There were particular losses in the technology issues. The energy names, too, declined sharply. Meanwhile, there were no equity groups offering refuge for traders. Even the defensive utilities and medical issues encountered notable selling.
While stocks have been weak lately and have encountered resistance on any up moves, today they turned decidedly lower. Today’s drop pushed the S&P 500 Index below its 50-day moving average. It is not clear if the market will pullback further from here, but the situation has likely become tenuous. The fact that stocks were unable to reverse course, even partially, is cause for some concern. This was not lost on traders, as the VIX, a widely-followed sentiment gauge, moved 27% higher to just under 17.
The economic news did not offer much to prop up the market. Notably, initial jobless claims for the week ended July 26th came in at 302,000. This reading was a bit better than had been expected, but was up from the prior week’s figure. We will get a better look at the employment situation tomorrow when the nonfarm payrolls report for July is released. This report is capable of moving the market, and will be widely watched. Traders will likely want to see that some progress is being made, but not enough to push the Fed to immediate action.
Finally, investors received quite a few corporate issuances to sift through. Earlier today, we received reports from Exxon Mobil (XOM) and MasterCard (MA). Both those issues headed sharply lower. - Adam Rosner
3:00 PM EDT - The stock market, after an apparent reappraisal of yesterday's Federal Reserve Board meeting, is plunging today, with the losses ballooning even further this afternoon.
In truth the market has been falling steadily all day, with nary a letup in a rare onslaught by the bears. The impetus for the selling is a concern that a pickup in economic growth in the second quarter, in which GDP rose by a much greater-than-expected 4.0%, could push the Fed to advance the timetable for its first interest-rate hike from mid-2015 to early in the new year.
Such fears were then given added weight when its was reported that the employment cost index rose due to an expected increase in wages. Many economists regard such a wage cost increase as the opening salvo in faster inflation growth.
So armed with such concerns and further burdened by worries about geopolitics on the global front, the market is plunging. With a little more than an hour to go in the trading day, the Dow Jones Industrial Average is now off 255 points; the Standard and Poor's 500 Index is down by 32 points; and the NASDAQ is lower by a staggering 82 points, or more than 1.8%. Similar percentage losses are being suffered by the S&P Mid-Cap 400 and the small-cap Russell 2000. There is simply no place for the haggard bulls to hide thus far today. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
12:00 PM EDT - Stocks are down sharply today as investors fear higher interest rates may be on the way sooner rather than later. Heading into the noon hour on the East Coast, the Dow Jones Industrial Average is off 196 points, the NASDAQ is down 76 points, and the S&P 500 is 28 points less than it was at yesterday’s close. Not surprisingly, market breadth is decidedly bearish, given the steep downturn in the major averages.
Yesterday’s strong second-quarter GDP figure was accompanied this morning by an unexpectedly sharp rise in the second-quarter Employment Cost Index, according to the Bureau of Labor Statistics. The 0.7% climb represented the fastest pace since 2008. While there is a strong case to be made that the rise in wages is a good thing for the economy in the long run since it would boost consumer spending, in the short term investors are taking the figure to be a precursor to higher inflation and a signal the Federal Reserve may need to raise interest rates earlier than previously thought.
The day’s other economic data included slightly less of a climb in weekly initial jobless claims, which hit a 14-year low last week, but a deceleration in the Chicago-area Purchasing Managers Index. The latter piece of news failed to alter the general market fear that higher interest rates may arrive within a year.
Not helping matters is a deteriorating outlook for Europe’s economy, as increasingly tough sanctions on Russia—a major trading partner—take effect. The euro zone is only slowly recovering from serious economic trouble a few years ago. Moreover, investors have been rattled by the financial troubles affecting Argentina, which shows all signs of defaulting on its debt. Argentina is South America’s second largest economy after Brazil, and another debt default would not be good for its growth prospects.
The day’s earnings reports clearly haven’t fired up the bulls, either, but there are a few stocks bucking the downtrend. Marathon Petroleum (MPC) shares are up nicely after a good profit report, for instance. The company is benefiting from the energy boom in North America, which allows it to refine cheaper oil. But, by and large, the bears are in charge heading into the afternoon session. - 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 - As the pace of earnings season picks up, we have some heavyweights set to report today:
First and foremost, the world’s largest publicly traded oil company and the biggest producer of natural gas in the U.S., Exxon Mobil Corp. (XOM - Free Exxon Stock Report) has already posted its second-quarter results earlier this morning. The showing beat consensus expectations and shares of this Dow-30 component were edging up in premarket trading. One thing to look for in that release in the planned push to drill in Russia’s Arctic seas. This is a huge opportunity for XOM, but tensions in that area are at a fever pitch due to the Ukraine conflict.
Elsewhere, retail giant Target Corp. (TGT) has tapped its newest CEO. Brian Cornell of PepsiCo, Inc. (PEP) has been selected. The chain had been seeking new leadership since May, when a failed push into Canada, coupled with a customer data breach, prompted the departure of the previous top executive.
In the fast-food arena, Yum! Brands (YUM) should see some pressure on its shares this morning, after news broke that illegal activity involving a Chinese supplier has significantly hurt sales over the last couple of weeks.
Also, some high-profile media companies that are in the M&A headlines lately each report today; Cable communications firm Time Warner Cable (TWC) and satellite TV concern DIRECTV (DTV) are prominently featured on today’s docket.
One note from after the trading session; Electric car maker Tesla Motors (TSLA) is set to report after Thursday’s close. Whispers of a weak production outlook have already been heard on the Street, so this situation will need to be monitored - Erik M. Manning
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The bulls received a big shot in the arm before the stock market opened yesterday--in fact, it was more like a one-two punch. First, social media stalwart Twitter Inc. (TWTR) issued better-than-expected quarterly metrics and noted a big surge in users. Those strong results helped to propel the company's stock to a formidable opening gain, silencing, for now, some of that company's critics. Then, about an hour before the start of the trading day, the Commerce Department reported that second-quarter gross domestic product had surged ahead by 4.0%. That more than countered a weather-impacted opening-period GDP plunge of 2.1%--earlier estimated as a fall of 2.9%. Estimates for the recently concluded three months had been for a GDP increase of 3.0%.
Armed with these better numbers and with a solid second-quarter showing at steel-making behemoth U.S. Steel (X), the stock market roared ahead at the open, with the Dow Jones Industrial Average gaining some 70 points at the outset. The tech-laden NASDAQ, meanwhile, pushed ahead by almost 35 points. A potentially big day for Wall Street, following a pair of unprepossessing sessions to start the week, appeared in the works. However, the bloom soon came off the rose, and within a half hour, or so, all of the Dow's initial gain and then some evaporated, and the index was soon in the red by some 25 points--for a swing of almost 100 points in about 40 minutes.
However, the NASDAQ managed to hold onto some of its gains, as did the small- and mid-cap indexes. What caused this sudden reversal? In large part, it might have been the fact that along with the better GDP growth figures, the report also acknowledged that inflation had jumped in the period to a better-than-two-percent increase. Those factors, specifically faster economic growth and higher inflation engendered logical concerns that the Federal Reserve, which was bringing its two-day FOMC meeting to a close might sooner than later, take a less-accommodative stance with regard to interest rates. That thought rattled investors. After that reversal, and a period in which the bulls tried, but unsuccessfully, to halt the slide, the Dow resumed its descent, at one point falling to a session loss of some 95 points, for a peak-to-trough swing of 165 points. From there, the bulls again attempted to halt the erosion, but with mixed success, initially.
Thus, going into the afternoon and with the upcoming FOMC meeting's conclusion in sight, the market was sitting with hefty losses, save for the NASDAQ, which held onto a midday gain of modest proportions. From there, the market began to pare its losses a bit, with the Dow, for example, recovering about half of that 95-point deficit as the 2:00 PM (EDT) hour rolled along and the Fed came out with its latest monetary statement. When it did conclude the meeting, amidst all the fanfare, the bank, as expected, pared its monthly bond purchases by another $10 billion, voting 9-to-1 to keep short-term interest rates unchanged, and acknowledging that both the pace of economic growth and inflation were picking up.
The immediate reaction was to celebrate on Wall Street, as the Fed dropped no major surprises and still seemed wedded to an easy monetary policy structure. On point, the Dow's losses were wiped away and a brief entry back into the plus column evolved, before that blue-chip composite eased back into the red once more, while the Standard and Poor's 500 Index went from a modest loss to a small gain, and the NASDAQ, which had remained in the black throughout this up-and-down session, added to those earlier gains.
The market then proceeded to drift aimlessly into the close, as Fed concerns could not be entirely overcome and festering overseas concerns continued to exact a toll on sentiment among even the most intrepid traders. All told, the market closed the session on a suitably mixed note. Specifically, the Dow, under pressure throughout, following the early buying burst, ended off by 32 points; the S&P 500 Index closed near dead center; and the NASDAQ remained in the black by 20 points. The S&P Mid-Cap 400 added three points and the small-cap Russell 2000 Composite climbed five points. Reflecting the mixed pattern, the Big Board saw more losing stocks than gainers, while the NASDAQ gave the nod to rising issues. Among the major groups, the tech stocks showed strength, boosted by a by a better-than-20% rise in the aforementioned Twitter, but the utilities were notably weaker on rate worries.
Looking ahead to the new day, we find that stocks were largely lower in Asia overnight, led into the red by a small drop in Japan's Nikkei, while in Europe so far this morning, the leading bourses are pressing lower on weak earnings and low inflation. Our market, meanwhile, is suggesting a material weaker opening when investors get down to business in less than an hour from now, on worries that the better economic showing in the second quarter could yet prompt the Fed to push up the start of its rate-tightening efforts. As to other influences, the next hurdle will be tomorrow's jobs data. That could be a market mover. For now, though, the immediate path seems to be sharply lower. - Harvey S. Katz