After The Close - The stock market declined sharply earlier today, but managed to selectively firm up in the afternoon. At the close of trading, the major averages were mixed. The Dow Jones Industrial Average was ahead roughly 40 points; the broader S&P 500 Index was off nominally; while the technology-heavy NASDAQ was lower by 53 points. Market breadth showed a divided session, with decliners slightly ahead of advancers on the NYSE. From a sector perspective, the technology and energy stocks lost ground, while the utilities and consumer issues managed to press ahead.
There were no major economic reports issued today. The lack of information may have had traders worrying about problems developing overseas. Specifically, many of Wall Street have become increasingly concerned about deteriorating relations between the U.S. and China. Meanwhile, tomorrow will be a light day for economic news, too. However, the pace should pick up on Wednesday, when the latest monthly Producer Price Index (PPI) and the wholesale inventories report are due released.
In corporate news, there were few notable corporate reports delivered today. However, in the coming days, the third-quarter earnings season will take center stage. Of note, JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) and Wells Fargo (WFC) will weigh in with their numbers at the end of this week.
Technically, the stock market has become quite volatile over the past few days. Looking ahead, perhaps the third-quarter earnings season will provide traders with a better sense of direction. - 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 - It was a tale of two cities on Wall Street last week. The five-day stretch started out on a strong note for the bulls, with investors emboldened by news that United States, Mexico, and Canada have reached a trade agreement, which still needs to be passed by Congress. The good tidings on trade, despite the continued dispute with China, and another round of strong reports on the U.S. economy, including hearty data on manufacturing and nonmanufacturing activity and manufacturing orders, kept the buyers in the market through last Wednesday. However, the tide change in a big way last Thursday, with rising bond yields and what appeared to be more hawkish commentary from Federal Reserve Chair Jerome Powell unnerving investors. The rising fixed-income yields increases competition for capital, and not surprisingly, stocks sold off sharply over the final two trading days of last week.
On Friday, the big news was the latest report on jobs creation from the Labor Department. At first blush, the report looked weak (nonfarm payrolls totaled 134,000 versus the expectation of 180,000 positions), but when looked at with greater scrutiny, investors learned that prior months’ totals were revised significantly higher, the labor participation rate held steady at 62.7%, the unemployment rate fell from 3.9% to 3.7%, and the average hourly wage rate climbed by eight cents. This report, along with initial weekly unemployment claims falling to a 49-year low on Thursday, suggests that the economy is strengthening and the labor market appears to be tightening. These figures have also brought increased sentiment that the central bank will remain wedded to its monetary tightening course, which historically has not been a good environment for equities. Against this backdrop, the major equity indexes were notably lower, with the Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index ending Friday’s session with respective declines of 180, 91, and 16 points. Overall, the selling was broadbased, with nearly all of the 10 major equity groups finishing in the red and declining issues outnumbering advancers by a wide margin on both the Big Board and the NASDAQ.
Looking at the week at hand, the news from the business beat will be light, but investors will get two important reports, especially given the recent worries about inflation, when the Labor Department releases data on producer (wholesale) and consumer prices on Wednesday and Thursday, respectively. That may shift the focus to the trade war with China (see below) until the third-quarter earnings season commences later this week with reports from two Dow-30 components, Walgreen Boots Alliance (WBA – Free Walgreen Boots Alliance Stock Report) on Thursday and JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) on Friday. The final day of trading this week will bring quarterly results from a number of prominent U.S. banks. In general, the consensus on Wall Street is that the third-quarter reporting season will be another good one for Corporate America.
With less than an hour to go before the commencement of trading stateside, the equity futures are indicating some continued profit taking when the U.S. stock market opens. So far overseas, the bears are front and center, with the main indexes in Asia finishing sharply lower overnight, while the major European bourses are in negative territory as trading moves into the second half of the session on the Continent. The international selling was stoked by this weekend’s decision by China’s central bank to reduce the amount of capital that banks are required to hold. The move raised fears that the world's second-largest economy is struggling in the face of the tariff disputes with the United States. Investors should note that the U.S. bond market is closed today in the observance of the Columbus Day holiday. Stay tuned. – William G. Ferguson