After the Closing Bell - It was a choppy session on Wall Street for most of the day, before the bears exerted their will in the final two hours of trading. Continued uncertainty overseas (see below), along with another mixed round of earnings reports unnerved investors. By the closing bell, the Dow Jones Industrial Average, the broader S&P 500 Index, and the technology-heavy NASDAQ were down 72, 16, and 53 points, respectively—the last index was weighed down by somewhat disappointing earnings news from computer giant Apple (AAPL). The S&P Mid-Cap 400 Index and the small-cap Russell 2000 were also notably weaker. The breadth of trading was decisively negative, with declining issues holding a sizable lead on advancers on both the Big Board and the NASDAQ.
The news from the other side of the Atlantic was not very uplifting either, though the major European bourses had finished modestly higher earlier today. The European finance leaders have hit a roadblock in their attempt to iron out another bailout loan for debt-saddled Greece. According to France’s President Nicolas Sarkozy his country and Germany are at odds over how to increase the scope of the euro zone's bailout fund. Mr. Sarkozy flew to Frankfurt to meet with German Chancellor Angela Merkel in an attempt to break the deadlock ahead of this weekend’s summit of European leaders.
Meanwhile, the economic news on these shores was a more upbeat. This morning, the Department of Commerce issued materially better-than-expected news on the housing front, as that long-beleaguered sector reported that housing starts jumped by 15.0% last month, to a seasonally adjusted annual rate of 658,000 homes. The companion building permits data showed that such indications of future construction activity, however, had dipped by 5.0% in September. On a year-to-year basis, both series showed nice recoveries. In another survey, the Labor Department reported that the Consumer Price Index, the government's key gauge of retail inflation, rose by the expected 0.3% in September. There had been some understandable angst ahead of this report, as the Labor Department had indicated yesterday that producer prices surged 0.8% last month. All in all, the two reports were decent and two other data series that would suggest the odds of the nation slipping into another recession are falling. Though, the latest Federal Reserve Beige Book summation (released at 2:00 P.M EDT) noted that while aggregate economic activity had continued to expand in September, the pace was either modest or slight in several of the districts. It appeared that the Fed’s report may have had a bit of a hand in the late-day selloff on Wall Street.
For most of the day, the U.S. economic data seemed to take a back seat to earnings news. The latest round of earnings reports included Intel (INTC - Free Intel Stock Report)—after yesterday’s market close, United Technologies (UTX - Free United Technologies Stock Report), and Travelers (TRV - Free Travelers Stock Report). American Express (AXP - Free American Express Stock Report), along with eBay (EBAY), was scheduled to report results shortly after the conclusion of trading today. Intel reported better-than-expected earnings and sales, as the chipmaking giant managed to overcome slower PC sales in North America and Europe by boosting profits in Asia. That stock, in response, rose 3.6% today. However, as noted, Apple posted weaker-than-expected results for the September quarter, prompting some nervous investors to turn bearish on the large-cap issue and question whether the tech giant had reached a near-term peak. Meanwhile, the quarterly reports from United Technologies and Travelers were a bit more encouraging—UTX shares were down modestly, while Travelers stock was one of the better performing Dow-30 members today. Other notable reporters today included Powerwave Technologies (PWAV), Yahoo! (YHOO), and Abbott Labs. (ABT)—the latter also announced that it is planning to split into two companies.
It was also not a great day to be long commodities. Despite a report showing that oil inventories for the week ended October 14th showed a drawdown of 4.7 million barrels, a comes in stark contrast with the consensus call for a build of 2.0 million barrels, the price of crude was down more than 2.5% on the New York Mercantile Exchange. Other notable decliners included contracts for soybeans and sugar. Conversely, those who held coffee, cocoa, and rice futures made a profit in the latest session.
Looking ahead to tomorrow, earnings will likely continue to dominate the news, led by a report from Dow-30 component AT&T (T - Free AT&T Stock Report). Investors will also be weighing in on the latest results from the aforementioned American Express. After tomorrow’s close, software giant Microsoft (MSFT - Free Microsoft Stock Report) will report. On the economic front, existing home sales data and initial weekly jobless claims will be monitored by investors for more clues as to how the economy is doing. - William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:30 PM ET - The U.S. stock market is somewhat mixed today. For now at least, concerns about the situation in Europe seem to have taken a back seat, as traders look more closely at today’s corporate earnings reports. In the tech sector, market mover Apple (AAPL) released disappointing results after the closing bell yesterday. An earnings miss by Apple is a rare event, and may have caught some traders off guard. The stock is trading sharply lower, and is weighing on the tech sector. The impact may be offset, in part, by strong numbers from Intel (INTC - Free Intel Stock Report) and Yahoo! (YHOO). In the financial area, Morgan Stanley (MS) shares are climbing, after that company posted better-than-expected profits. Also Travelers (TRV - Free Travelers Stock Report) stock is rising on a reasonable report, all things considered. In the industrial arena, United Technologies (UTX - Free United Technologies Stock Report) put out a decent release, raising its guidance. However, that stock is mixed. In drugs, Abbott Labs (ABT) is getting a boost from its report, and some news of a possible reconfiguration.
The economic reports were generally favorable this morning. There was also positive news on the housing front, after yesterday’s good report from The National Association of Home Builders. This morning the Department of Commerce announced that housing starts jumped to 658,000 units for the month of September. The 15% improvement over the August figure easily surpassed the consensus views. There was also some positive news concerning inflation. The CPI moved up just 0.3% in September, which was about what analysts had anticipated. The core rate was tamer than expected, suggesting little need to worry about inflation, or any associated interest rate hikes, for now- at least.
At roughly noon in New York, the markets are still mixed. The Dow Jones Industrial Average is up 13 points (0.12%); the S&P 500 Index is down two points (-0.19%); but the NASDAQ, is still in negative territory, down 18 points (-0.69%). Market breadth highlights the directionless tone. Declining issues are just slightly ahead of advancers on the NYSE, with a less favorable showing on the NASDAQ. As could be expected, the market sectors are also giving an uneven performance. Utilities, healthcare, and consumer names are in the lead. Basic materials and technology stocks are the laggards. Stocks heading higher include: United Rentals (URI), St. Jude Medical (STJ), Nuance (NUAN), and Human Genome Sciences (HGSI). Stocks moving lower include: On Semiconductor (ONNN), Cree (CREE), and Western Digital (WDC).
- Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Opening Bell - After tumbling on Monday, to the tune of 247 points in the Dow Jones Industrial Average, the equity market got off on the wrong foot again yesterday. In fact, within an hour or so after the start of trading, that same 30-stock composite had fallen to a loss of just over 100 points. However, when those losses did not balloon as they had the prior session, the buyers came in, paring the early deficit. Then, by the early afternoon, equities started to move into plus territory, stabilizing with a Dow gain of just over 100 points.
Finally, in the last hour of trading, rumors that Germany and France would be adding to the bailout fund for Europe's troubled bank's really brought in the buyers, so that shortly after 3:00 (EDT), the market spiked, pushing the Dow ahead by some 250 points, generating a trough-to-peak surge of better than 350 points in that index. However, some caution crept into the market in the final few minutes and that 250 point plus gain was whittled away, leaving the Dow, which eased to a 140-point gain briefly, closing up by a still formidable 180 points. This roller coaster ride also took hold on the NASDAQ, where an early 30-point drop became a 43-point gain at the close. The Standard and Poor's 500 Index added almost 25 points, while the small-cap Russell 2000 Index jumped 21 points. Overall, much of Monday's loss was reversed, as a look at the latest mutual fund results can attest.
Of course, this elevated level of volatility has more to point to than just Europe, although that is the dominant theme at present. For example, there also is the U.S. economy, where yesterday we saw a sudden spike in producer prices, with that key metric gaining 0.8% in September, four times the nominal increase that had been the consensus forecast. Meanwhile, this morning has already brought two more key reports, with the government's report on the Consumer Price Index, where the Labor Department reported that retail inflation rose by the expected 0.3% in September. At the same time, the Commerce Department indicated that housing starts came in much higher than forecast in September, although that major barometer remains mired in a historic five-year slide that seems unlikely to fully abate anytime soon.
Then there are the earnings reports, which are coming in fast an furious. Yesterday, it was IBM (IBM – Free IBM Stock Report) that disappointed skittish investors, as that tech giant did not exceed expectations they way the financial community had become used to. Overall, IBM did well, but that strength was not enough to prevent a fairly sizable retreat in the stock. Now, this morning, the NASDAQ futures are getting hit, as tech darling Apple (AAPL) did not achieve the top-and bottom-line strength expected, and that stock, which closed yesterday at $422.24 a share is indicated at $402 in the pre-market. The Apple disappointment, if one can reasonably label a 54% increase in earnings as disappointing, has sent the NASDAQ futures to an early loss of almost 13 points. The problem for Apple is that iPhone sales came up short. Of course, it was reasonable to expect that with a new version of the iPhone debuting in the current quarter that many would postpone purchases. That reality seems to have missed many analysts. On the other hand, giant chipmaker and Dow-30 component Intel (INTC – Free Intel Stock Report) reported better-than-expected sales and earnings in its third quarter, and that stock is suggesting a moderately higher opening, with the issue also indicating that it will open the session at a new 52-week high.
Meantime, though, Europe remains the key variable. The aforementioned report in a British newspaper that France and Germany would be upping the bailout fund has been dismissed as just a rumor, with no substance at this time. We'll see. Still, stocks in Europe are up nicely this morning. Also, in Europe, a major U.S. ratings agency has lowered Spain's credit rating by two notches, while unions in Greece have begun a 48-hour general strike to protest possibly pending austerity measures in that struggling nation.
With this background and more earnings reports on tap, the recent level of volatility is expected to persist, suggesting that after a likely lower start we could be bracing for another bumpy ride today. Fasten your seatbelts. - Harvey S. Katz
At the time of this report's issuance, the author has positions in INTC.