After The Close - Stocks opened lower on Wednesday, as traders looked to cap gains following a solid two-day start to the weekly session. The Dow Jones Industrial Average fared relatively better than its counterparts, the S&P 500 and NASDAQ 100, which pared their losses in the afternoon and managed to each finish a shade above their respective breakeven lines. The blue chip composite rose 39 points on the day, helped out by Chevron (CVX – Free Chevron Stock Report), and Walt Disney (DIS – Free Walt Disney Stock Report), among others. Market breadth was similarly split between advancing and declining stocks, as strength in small-cap trading was offset by selective selling among the larger-cap issues. The basic materials sector, yesterday’s leading industry grouping by aggregate gains, had returned the most value as the closing bell sounded.
The business beat saw a new Producer Price Index reading. In the month of August, the level rose 0.2%, or below the slightly higher consensus expectations. While we do not believe the minor miss was a cause for investor concern, the absence of a monthly beat likely contributed to the middling movement of the NYSE. Tomorrow, the bulls will look to rejuvenate their early-week momentum if the Consumer Price Index and initial weekly jobless claims manage to impress traders.
Meanwhile, U.S. crude oil rose above $49.00 per-barrel today. Positivity came from both sides of the pond, with OPEC and the U.S. Energy Information Administration amending their forecasts in a way that suggests the global commodity market is tightening. Unfettered output growth has long hindered the price of oil, a headwind the international cartel has struggled to address with its productivity limits. Now, however, investors seem to be warming up, albeit cautiously. Overall, it was a solid bounce back for U.S. crude oil, which finished the day up 2.2%, at $49.30.
So, as the market appears to have fully digested Treasury Secretary Steven Mnuchin’s optimistic statements on tax reform, as well as a moderated tone regarding North Korea and hurricane damage at home, we anticipate more back-and-forth trading between the bulls and the bears. The S&P 500 remains within striking distance of the 2500-point milestone. Stay tuned. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
12:20 PM EDT - The equity markets got off to a weak start this morning, and remain under some selective pressure as we move through the session. At roughly noon in New York, the Dow Jones Industrial Average is ahead seven points; the broader S&P 500 Index is down nominally; and the NASDAQ is lower by eight points. Market breadth shows a divided session, with advancers just about even with decliners on the NYSE. From a sector perspective, the energy and consumer names are pressing nicely ahead, while the healthcare and basic materials issues are experiencing some selling today.
Meanwhile, in economic news, the Producer Price Index rose 0.2% during the month of August, where expectations had called for a slightly larger increase. Elsewhere, according to the EIA, crude oil inventories increased by 5.9 million barrels in the latest recorded week. Traders seemed generally pleased with the report, as the price of crude oil is up slightly, to just over $49-a-barrel in New York. Tomorrow, the Consumer Price Index is due to be released, along with the latest weekly initial jobless claims.
Finally, a couple of companies delivered financial results over the past 24 hours. Of note, shares of Cracker Barrel (CBRL) are trading slightly lower in response to a mixed report. After the market closes, we will hear from National Beverage Corp. (FIZZ). Tomorrow, technology leader Oracle (ORCL) will weigh in with its results.
Technically, stocks have made some progress over the past few days, so a slight pause here may be warranted. - 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 - The stock market, which soared on Monday, on apparent relief that the damage from Hurricane Irma was not as devastating as had been forecast due to a slight late shift in the storm's route, started the session yesterday also to the upside, albeit less dramatically so. On point, stocks jumped at the open, with the Dow Jones Industrial Average quickly climbing to a morning-best gain of more than 75 points. The other indexes rose as well, with somewhat more strength in the small- and mid-cap composites. Another record high by the S&P 500 Index also fed the optimism, as Wall Street continued to do well, with relief over the eventual outcome of Irma remaining a key factor in the market's sense of well being.
Meanwhile, investors also kept an eye on tech icon Apple Inc. (AAPL - Free Apple Stock Report), as that company prepared for the introduction of three new iPhone models. Apple shares were lower in the morning following a healthy gain on Monday. Also of note were comments from Treasury Secretary Mnuchin, who opined that there was going to be an impact on GDP in the short run from Irma. Our thinking is that the nation's economy, which we had expected to grow by 3%, or so, in the third quarter, now looks as if it will increase closer to 2%. Much of this differential should be made up later this year and in 2018 from rebuilding efforts.
Then, as the session progressed, the market's exuberance faded and the Dow's gain was pared back as we headed into the latter stages of the morning. But the pullback was not convincing, and as the morning wound down, stocks steadied, then edged back up in unexciting trading. As before, Wall Street seemed relieved that the damage from the hurricane was less extensive than feared, while there were no new nuclear tests from North Korea. As to economic data, following inflation issuances mid-week, the focus will turn to a pair of reports set for Friday morning when the government issues figures on retail sales and industrial production. A modest gain is forecast for the former series and a flattish result is seen on the industrial side.
The market continued higher as the afternoon began, with the likely slowing in GDP growth seen as less of a negative for stocks as it should mean a deferral in interest rate hikes from the Federal Reserve until next year. So, stocks steadied at higher levels, with the Dow holding onto a gain on the order of 50-80 points into mid-afternoon, while advances still were inked by the S&P 500 and the NASDAQ. Breaking the advance down, eight of the 10 equity groups were higher with 90 minutes of the session to go, with the utilities off sharply, as investors accepted greater risk, while rising stocks held a nine-to-five lead on declining issues.
Investor optimism was also fueled by the Administration's suggestion that if tax reform does get passed, as it believes it will, the changes could be effective back to January 1, 2017. It appears that every time the tax issue is brought up in a positive light, stocks rally. To date, however, the matter of reform remains up in the air in partisan Washington. Still, stocks continued to rally through late afternoon and into the close, with the Dow ultimately ending higher by 61 points. Gains also were inked by the other indexes, as September is thus far a higher month for Wall Street in contrast to its reputation as a difficult month.
Now, a new day gets under way and we see that stocks were mixed in Asia overnight, while on the Continent, the main bourses are tracking an uneven path, as well. At the same time, Treasury yields, up in dealings yesterday, are now back down slightly in early action; oil prices are higher; and gold prices are higher, too. Finally, action in our futures to this point suggests a somewhat weaker start to the trading day, which begins at 9:30 AM (EDT), after back-to-back stronger sessions. - Harvey S. Katz, CFA