After The Close - Though the major market indexes were more mixed on Tuesday, the session went to the bulls in the end. Advancing shares outnumbered declining issues steadily throughout the day, with strength in the noncyclical consumer goods leading the charge. The positive undertone offset yesterday’s bearish tilt. Traders are evidently in something of a holding pattern until third-quarter earnings season heats up in the coming days and weeks. And, while their respective gains were challenged, to varying degrees, for stretches of the day, the large-cap composites each set all-time highs in the opening hour. At the final bell, the Dow Jones Industrial Average and S&P 500 registered respectable single-day upticks, while the NASDAQ managed to finish the day barely on the positive side of its breakeven line.
Though earnings season will begin in earnest later in the week, when a slate of financial institutions release their quarterly reports, some news from Corporate America made waves today. Wal-Mart (WMT – Free Wal-Mart Stock Report) shares jumped on the positive reaction to the announcement of a $20 billion buyback plan, as well as management’s reiteration of its full-year earnings guidance. The retailer also indicated it was accelerating the growth of its e-commerce operations, adding 1,000 online grocery pickup locations in the United States in 2019. Pfizer (PFE – Free Pfizer Stock Report) began the day strong amid reports that it was exploring sale options of its consumer healthcare operations, though it failed to sustain much of the rise as the day wore on.
On the other hand, General Electric (GE – Free General Electric Stock Report) was unable to maintain an early gain following yesterday’s fall. The diversified giant’s stock has suffered from abrupt changes to the timing of its succession changes at the helm, as well as investor concern ahead of its October 20th earnings release. Elsewhere, multinational conglomerate Honeywell (HON) figures to be active on the merger and acquisition front following the announcement of the spinoff of its home and distribution businesses.
Meanwhile, the price of U.S. crude oil enjoyed a sizable rally today, helping to offset last week’s bearish downturn. The 2.7% gain, to $50.92 per barrel, was the biggest one-day advance in two weeks, and was spurred by Saudi Arabia’s vow to cut output next month by 560,000 barrels a day. A slowdown in U.S. production in the country’s Gulf region also drove the rally.
Looking forward, the remainder of the week’s trading will likely center around earnings season, with some other economic items also set to influence the market. Tomorrow, the Federal Reserve will release minutes from its most recent policy summit. Investors will weigh the transcript, as well as updated stats on producer prices, initial jobless claims, and retail sales in the subsequent sessions, as they gauge the central bank’s monetary outlook. Currently, given largely positive growth and another successful, though moderately so, corporate earnings campaign, most expect a rate hike when the Fed meets in December. – Robert Harrington
At the time of this article’s writing, the author did not have any positions in the companies mentioned.
12:15 PM EDT - The stock market opened higher today, but seems to be struggling to stay on an upward course. At just past the noon hour in New York, the Dow Jones Industrial Average is up 34 points; the broader S&P 500 Index is ahead two points; and the NASDAQ is now lower by nine points. Nonetheless, market breadth is still favorable, with winners ahead of losers on the NYSE. Most of the major market sectors are showing progress, with gains in the energy and consumer issues, offsetting weakness in the healthcare and technology stocks.
There were no economic reports delivered today. Tomorrow will also be a relatively quiet day for news, as well, but for traders watching the commodity markets, the EIA will release its latest weekly crude oil inventory numbers. The pace should pick up on Thursday, as the Producer Price Index (PPI) for the month of September is slated to be released, along with the latest weekly initial jobless claims.
Finally, few major corporations reported financial results today. However, there has been some M&A activity in the healthcare area worth mentioning. Shares of KalVista Pharmaceuticals (KALV) are soaring on news that drug giant Merck (MRK – Free Merck Stock Report) has purchased an interest in the company. Further, shares of Express Scripts (ESRX) are declining, after the pharmacy benefit manager reported that it will acquire EviCore, a privately-held business, for $3.6 billion.
Technically, the equity market has made considerable progress lately. The next catalyst for stocks will likely be the third-quarter earnings season, which will be commencing shortly. However, with valuations at elevated levels, corporations will be under some pressure to impress. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Wall Street began the second full week of October with an early modest advance, which saw the Dow Jones Industrial Average move just past 22,800 for the first time ever, rising almost 30 points in the process. But that initial uptick did not last, as stocks would soon head back toward the neutral line, where they then stayed for some time, ending the morning hours with just nominal gains. The Street is hoping for tax reform, but that is still weeks or months away. In the meantime, a more immediate concern is third-quarter reporting season.
That event, which is due to get under way this week, will be headlined at first by the release of results from several high-profile banking giants, namely Citigroup (C), Bank of America (BAC), and JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report). Expectations are modest for the quarter, with earnings improvement now forecast to be in the range of the low-to-mid-single digits, following quarterly increases of almost 16% and 11%, respectively, for the first and second periods of this year. Steep projected losses by the casualty insurance companies will depress the increases for the quarter.
The market then turned modestly lower as the afternoon began, with the Dow and the S&P 500 edging into the minus column, while the NASDAQ, on some selective strength in the technology names, held onto small gains. The back-and forth would then continue into the early afternoon, but as the session wore on, there was a modest, but pronounced bias to the downside. Among the major casualties on the day were the shares of the food processing companies. Already trading near their 52-week nadir, the group fell notably once again.
Meanwhile, shares of General Electric (GE - Free GE Stock Report) tumbled some 4%, following a succession of management changes over the past several weeks. Investors also are concerned about the giant conglomerate's pending third-quarter profit report, which is scheduled for release on October 20th. So, ahead of this issuance, the shares tumbled some 4%, to a two-year low, making it the biggest casualty on the 30-stock blue chip composite. The selling continued into the latter stages of the afternoon, with the market settling in near the session's lows.
In all, the market ended matters with modest losses among the leading averages, including a 13-point setback in the Dow and losses of five points in the S&P 500 Index and 10 points in the technology laden NASDAQ. Also, the Russell 2000 dipped seven points. Additionally, seven of the 10 leading equity groups fell, with health care, consumer cyclical issues, and basic materials stocks losing the most. What’s more, losing stocks held sway on the Big Board by some four to three.
Looking out to a new day now, we see that stocks were trading higher in Asia overnight, despite the softer close yesterday in New York, while in Europe, the early read on the stock market is a bit weaker. In other markets, gold is trading higher; oil prices are back over $50 a barrel on West Texas Intermediate crude; and Treasury yields are off slightly. Finally, in trading on the U.S. equity futures, the early returns suggest that Wall Street will open the session to the upside. - Harvey S. Katz, CFA