The stock market fell back for a second day in succession yesterday, with most of the damage taking place on the NASDAQ and the smaller-cap indexes, such as the Standard and Poor's Mid-Cap 400 Index and the Russell 2000 Composite. The large-cap-dominated Standard and Poor's 500 Index, meantime, was off by less than five points and the Dow Jones Industrial Average, a stellar performer thus far this year, managed to stay essentially unchanged, with a gain of less than a point, notwithstanding a disappointing revenue and earnings report from drug making giant Pfizer (PFE - Free Pfizer Stock Report). The Pfizer news proved a modest drag on the blue chip index, as did weakness in the energy group.
Overall, it was a poor day for the stock market, which is in need of some profit taking and seems to now be getting it following an unrelenting rally over the past few months, which has seen several of the leading equity indexes post three-year highs and the Russell 2000 Composite reach an all-time peak.
Meanwhile, in addition to the aforementioned Pfizer, several other equity issues stood out during the session, including Avon Products (AVP), as the one-time nifty fifty stalwart, posted better-than-expected quarterly results. The stock rose in response. On the downside, however, was Computer Sciences (CSC), as the information technology concern once again lowered its guidance for the year. That stock tumbled by more than six points, or nearly 13%. Also, the energy sector in general, and a pair of blue chips, Chevron (CVX - Free Chevron Stock Report) and Exxon Mobil (XOM - Free Exxon Mobil Stock Report), in particular, fell victim to selling pressure. The latter two issues fell by more than two points and one point, respectively. Crude oil prices again retreated yesterday, as did some commodities, along with gold and silver. The latter, in fact, is now off some 15% in recent days on profit taking in the metals sector. All told, silver posted its sharpest one-day percentage decline in some three decades yesterday.
In the economic news, car sales came in strong, with several auto concerns recording sizable gains in volume for April. That performance helped the shares of auto giant General Motors (GM) to a nice gain, but did little for the shares of rival Ford Motor (F), which eased by a few pennies in price. Finally, factory orders gained nicely, thereby providing a further argument that the nation's economy, which expanded by a tepid 1.8% rate in the first quarter of this year, will strengthen notably in the current three months. In all, we now see the nation's gross domestic product climbing by 3%, or more, in the April-to-June period.
Now, a new day dawns, and after another holiday in Japan, which closed trading, and a generally mixed tone in Europe, our own futures have erased some early gains and later losses, are now generally mixed with less than an hour to go before the start of the new trading day. Specifically, the Standard and Poor's 500 Index futures are up by less than a point, while the NASDAQ futures are off by less than a point.
In the news background, we have seen that the European Union and the International Monetary Fund have come to the aid of troubled Portugal, giving that nation a financial bailout package of $116 billion over three years, in a move that is designed to help it shore up an ailing economy. Also, India has raised its benchmark lending rate by half a percentage point, in an effort to dampen inflationary sentiment, even as it lowers its economic growth forecast for the year.
Finally, the Institute for Supply Management, an Arizona-based trade group, which on Monday issued a survey showing a 21st straight month of improvement in the manufacturing sector, will release its monthly reading on the services sector later on this morning, when it reports on non-manufacturing activity across the nation. A modest rate of improvement is expected on that front. That is a critical data point, as services account for some 70% of aggregate economic activity in this country. That data could have some influence on a trading session that, as noted, may commence with little overall direction this morning. A step-up in merger activity and other takeover news this morning, however, could provide some support for the market as the day wears on. Stay tuned.
At the time of this article's writing, the author had positions in PFE.