After The Close - The stock market managed to recover some ground today, after yesterday’s steep selloff. At the close of trading, the Dow Jones Industrial Average was ahead 56 points; the broader S&P 500 Index was up nine points; and the NASDAQ was higher by 44 points. Market breadth was slightly favorable, as winners were modestly ahead of losers on the NYSE. Meanwhile, the major market sectors were mixed. The consumer and healthcare stocks managed to advance, offsetting weakness in the energy and basic materials issues.

Today’s economic news was generally supportive. The nation’s employment situation continues to improve. Of note, initial jobless claims dipped to 232,000 for the week of May 13th, where analysts had been looking for claims to increase. The weekly continuing claims showed improvement, as well. Meanwhile, according to the Philadelphia Fed, business conditions in the greater Philadelphia region improved nicely in the month of May. Finally the Conference Board’s Index of Leading Economic Indicators rose 0.3% in April, which more or less matched the consensus view. Tomorrow will be a quiet day for economic news. However, a couple of regional Federal Reserve Bank Presidents are slated to make some comments.

Elsewhere, in the corporate arena, a few large companies weighed in with reports over the past 24 hours. Specifically, shares of Cisco Systems (CSCO Free Cisco Stock Report) sank today, after the networking giant delivered a mixed release. Shares of Wal-Mart Stores (WMT Free Wal-Mart Stock Report) rose, after the big box retailer produced solid results, helped by a growing online business.

Technically, equities encountered some considerable resistance yesterday, and are now attempting to recover. Yesterday’s selloff clearly reflected growing uncertainty about the current political situation in Washington. In addition to watching the corporate sector, investors will also likely be closely following the developments in the nation’s capital. - Adam Rosner

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


12:10 PM EDT - The major U.S. equity indexes, fresh off of yesterday’s sharp selloff, started the session in the red again this morning, with concerns that turmoil in the Trump Administration may pose a big threat to his attempt to get a pro-business agenda through Congress in the coming months. The stock market rose sharply in the months following the election on hopes of some business-friendly legislation (most notably tax reform) and looser regulations being on boon for U.S. corporations. However, the recent turmoil has raised questions about how many reforms will pass this year. Hence the selling we have seen in recent sessions.

That said, the major equity averages started to mount a partial comeback not too long into the trading session, and are now in positive territory as we pass the midday hour on the East Coast. Our sense is it may be a case of some bargain hunting following yesterday’s selling. The underlying strength in the economy may be giving investors an incentive to use Wednesday's retreat to get back into the market at somewhat of a bargain price. On point, there is some interest today in the financials stocks after yesterday’s 3% decline for the sector.

In general, the trading is mixed among the 10 major equity groups today. On the plus side is notable interest in the healthcare, technology, and consumer discretionary stocks, with the latter area being helped by strong quarterly earnings report from industry behemoth Wal-Mart Stores (WMT Free Wal-Mart Stock Report). Conversely, the commodities and higher-yielding sectors are trading in the red again this morning. 

Our sense is that some important earnings news from Corporate America has taken some of the investment community’s attention away, at least for the moment, from the drama surrounding the Trump Administration. As noted, Wal-Mart Stores stock rose after the retailing giant’s quarterly earnings beat consensus expectations. The report is giving a boost the struggling consumer discretionary stocks. However, the news was not all good, as the stocks of technology giants Alibaba (BABA) and Cisco Systems (CSCO Free Cisco Stock Report) are lower after each company reported semi-disappointing results. For Cisco, it was a top-line miss, while Alibaba was hurt by a lighter-than-expected share-net result. 

Meantime, the news from the business beat was encouraging this morning, which is giving a bit of support to the market. Before the commencement of trading stateside, the Labor Department showed that weekly jobless claims unexpectedly fell last week and the number of individuals receiving unemployment hit a nearly 30-year low, pointing to rapidly shrinking labor market slack.

Looking ahead to the second half of the session, market fundamentals are clearly tilting in favor of the bulls. The small and mid-cap sectors are joining the large-cap stocks in positive territory. Likewise, advancing issues are leading decliners on both the NYSE and the NASDAQ, with the spread comfortably in favor of the bulls on the latter exchange. That said, the situation in Washington D.C. is a fluid one and for that reason we can’t rule out some continuation of volatility this afternoon that has resurfaced over the last few weeks. Stay tuned.  - William G. Ferguson

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


Before The Bell - After a solid Monday and a mixed Tuesday, which continued the range-bound pattern on Wall Street of late, the bulls and bears received a wake-up call yesterday morning. And, for once, it was not earnings, the economy, or events overseas that shook up the Street. Rather, it was news out of Washington that rattled the heretofore calm in the markets. Specifically, late-Tuesday afternoon brought reports that President Trump had allegedly asked former FBI agent James Comey to back off the investigation of erstwhile National Security Advisor Michael Flynn.  

After that news, the markets in Asia and Europe moved lower overnight and early yesterday morning. And on our shores, the equity futures showed an early triple-digit downward move in the Dow Jones Industrial Average in the pre-market hours. That setback then continued as live trading began at 9:30 AM (EDT) in New York, with the Dow quickly falling to a loss of some 200 points. The S&P 500 Index, which had moved by less than half a percentage point daily for nearly three trading weeks, plummeted by nearly a full percentage point during that initial selloff.

This concern is frankly new for Wall Street. To wit, hopes (mostly for tax reform and health care revision) have been front and center when it comes to Washington, rather than worries of this sort. The bull market also has been sustained by strong earnings and a solid economy. Both of these remain in place. But now, the political winds are taking a toll on investor sentiment. And if yesterday was a barometer of things to come, these worries will take a toll. The fear is that an extended crisis involving the Trump Administration could derail hopes for the President's legislative agenda.      

The morning's losses, meanwhile, increased for a time, so that as we passed the 90-minute mark of trading, the Dow Industrial's loss had reached 290 points, while the NASDAQ's setback had topped 100 points. It was a full-fledged rout, with few, if any, places to hide, save, perhaps, for the utilities. The steep losses continued into the afternoon, with the Dow breaking the 300-point decline level by 2:00 PM (EDT). A loss of more than 2% was recorded by the NASDAQ at that time, while the Dow and S&P 500 showed deficits in excess of 1.6% The S&P Mid-Cap 400 and the Russell 200 were off by more than two percent each.    

The selling intensified into the close, with the Dow (finally off 373 points), the S&P 500 Index (down 44 points), and the NASDAQ (lower by 159 points) all ending matters at just about the session's lows, with bargain hunting--a staple of most down sessions so far in 2017--totally absent. Of course, this could be an overreaction, especially if the Administration is vindicated by subsequent events. Still, should the goings on of the past week force a special prosecutor onto the scene, much, if not all, of the President's popular legislative agenda--at least on Wall Street--could be delayed or permanently sidetracked.

At a minimum, the next few sessions will be tension filled. A loss of this magnitude is not easily overcome, especially as it was the first politically motivated setback since the election in November. True, earnings remain supportive and most economic metrics point to a nice pickup in business activity in the current quarter, after a lethargic opening-period performance in which GDP advanced by just 0.7%. Also, the market remains overbought, even after yesterday's sharp reversal and, as such is still vulnerable to further political headwinds in the days to come.      

Looking out at a new day, which the bulls hope will be notably better, we see that stocks in Asia, which eased off modestly the day before, traded lower overnight, while in Europe, where the indexes underwent a more substantial setback early yesterday, the bourses are showing notable weakness. At the same time, interest rates, which fell yesterday, are down again in a flight to safety, while oil is headed lower so far in early New York dealings. As to our futures, the early read is lower on Washington worries, suggesting a weak start. What seems certain no matter which way we ultimately trade today, is that the session's action will be volatile. 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.