After The Bell - Wall Street kicked off the month of May on a good note, with each of the major U.S. equity indexes finishing in the plus column. By the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index had added 66, four, and eight points, respectively, with the index of 30 bellwether companies at one point reaching its highest level since December of 2007. Pushing equities forward was a good report on the U.S. economy. However, some late-day profit taking (especially on the NASDAQ) did pare a good portion of the earlier gains. Advancing issues led decliners by a comfortable margin on both the Big Board and the NASDAQ—through the spread did narrow as the trading session drew to a conclusion.
As noted, the primary catalyst today was an encouraging report on the U.S. economy. Specifically, at 10:00 A.M. (EDT), the Institute for Supply Management reported that U.S. manufacturing activity rose in April, coming in at a better-than-expected reading of 54.8. That exceeded the consensus expectation of 53.0 and surpassed the prior-month reading of 53.4. It was the report's best score since last June, when a reading of 55.8 was achieved, and marked the 33rd straight monthly expansion in this sector. It was also a reassuring reading for those who have grown a bit weary of how sustainable the current economic growth pace may be. Not surprisingly, those sectors most closely tied to the performance of the economy showed some leadership today, with notable gains turned in by basic materials, energy, transportation, and financial stocks. Oil stocks, in particular, moved higher as the price of crude has risen sharply over the last few sessions. Shares of Chesapeake Energy (CHK), Exxon Mobil (XOM – Free Exxon Mobil Stock Report), ConocoPhillips (COP), and Anadarko Petroleum (APC) finished notably higher.
However, the economic news from overseas was not as uplifting. Both China and England reported underwhelming manufacturing activity readings—though the Asian powerhouse’s latest manufacturing PMI figure of 53.3 was its best reading in nearly a year. England’s PMI reading fell from 51.9 in March to 50.5 in April. Still, trading on both Continents was light as many traders were off in observance of the May Day holiday. Helping trading in London was a well-received earnings report from Lloyds Banking Group PLC, which pushed British financial stocks higher.
Meanwhile, the earnings reports were not as encouraging today as they have been for most of the heavy earnings season. Two notable disappointments came from the drug industry, where Dow-30 component Pfizer (PFE - Free Pfizer Stock Report) and Biogen (BIIB) reported lackluster results. And despite the aforementioned surge in energy prices, shares of BP PLC (BP) and Talisman Energy (TLM) finished lower as neither of the energy concerns delivered head-turning results. Not surprisingly, the healthcare group was one of the smallest gainers among the 12 major sectors. The consumer cyclical group, meantime, was the only major sector to finish the session in the negative column.
The promising manufacturing data did seem to ease some recent concerns about the U.S. economy. There was thus movement out of bonds and into the more risky equities. In fact, the yield on the benchmark 10-year Treasury note, which moves in the opposite direction to the price, jumped four basis points today. Whether or not this is to continue will probably have a lot to do with the forthcoming reports on the job market. Tomorrow we will receive Automatic Data Processing’s (ADP) monthly report on private-sector payrolls; Thursday brings the latest data on initial weekly unemployment claims—which have trended upward in recent weeks; and on Friday the much anticipated reports on employment and unemployment are to be released. – William G. Ferguson
At the time of this report’s writing, the author did not have positions in any of the companies mentioned.
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12:30 PM ET - The U.S. stock market is pushing higher today, as traders look at corporate earnings reports and recent economic releases. This morning, The Institute for Supply Management’s Manufacturing Index came in at 54.8 in April, which was better than the 53.4 figure posted in March, and also ahead of analyst expectations of 53.0. Further, the Department of Commerce released the construction spending figures for the month of March. The report showed construction spending increased 0.1%, which was a bit lighter than expected.
Tomorrow, we get a better view of the nation’s economy, as the March factory orders will be released. For those tracking the employment situation, the ADP Employment Change report for April is also due out tomorrow morning. Then, weekly initial and continuing claims come out on Thursday, and the Government’s Employment report for April is out on Friday. So, all in all, there is quite a bit that can move the market over the next few days.
Traders also received a number of the corporate reports this morning. In the Dow, Pfizer (PFE - Free Pfizer Stock Report) shares were off initially, but have since firmed up, after the drug giant postedmixed-to-uninspiring results. Elsewhere, in the energy sector, shares of Chesapeake Energy (CHK) are up on news of a management change. That issue is slated to report results shortly. Also in the energy area, BP (BP) stock is not moving much after the company posted sluggish quarterly results.
As we pass the noon hour in New York, the markets are near their session highs. The Dow Jones Industrial Average is up 114 points (0.9%); the S&P 500 Index is ahead by 16 points (1.1%); and the NASDAQ is leading the charge, up 33 points (1.1%). Market breadth is decidedly positive, as advancers are outnumbering decliners by nearly 5 to 1 on the NYSE. The market’s sectors are all participating in the up move, with leadership in the right places. The transportation, financial, basic materials, and technology shares are all leaders. There is some sluggishness in the consumer sector and in the utilities.
Technically, the market had been moving sideways for a couple of weeks after the drop in early April. Over the past few sessions, the market has rallied, on decent volume, which is a good sign. Today’s move further extends that upward push, as the indexes will soon be testing their 52-week highs. The major averages have all crossed over some key psychological areas. Specifically, the Dow is at 13,300; the NASDAQ is back above 3,000; and the S&P is now over 1,400. No doubt, with the weakness we have experienced in May in past years, traders will be eagerly watching this month unfold. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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Stocks to Watch from The Survey – Yesterday’s merger and acquisition frenzy has spilled into today, as restaurant operator P.F. Chang’s China Bistro (PFCB) has agreed to a $1.1 billion takeover bid from private-equity firm Centerbridge Partners. The $51.50-per-share offer price represents a 30% premium to the stock’s closing price on Monday, and the issue is trading sharply higher in the premarket. Also, semiconductor company Integrated Device Technology (IDTI) has struck deals to buy industry peer PLX Technology and privately held Fox Electronics. Integrated’s shares are down sharply in the premarket.
Nonetheless, today’s trading will likely be driven more by corporate earnings than M&A activity. This morning, drugmaker and Dow-30 component Pfizer (PFE – Free Pfizer Stock Report) reported lackluster first-quarter results. Revenues were in line with our forecast, but earnings fell short of our estimate. The stock is down slightly in premarket trading. Another drug company, Biogen (BIIB), also reported unimpressive results today, causing the stock to move lower in the premarket. Investors also received quarterly financial data from a number of energy companies, including BP PLC (BP) and Talisman Energy (TLM), neither of which delivered head-turning results. – Matthew E. Spencer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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Before The Bell - It's May Day, the first day of a month that will normally bring cheers to the currently downcast bears. In fact, there is even a time-honored, or perhaps time-worn, mantra on Wall Street that goes "Sell in May and go away''. The meaning, of course, is that the gains in the equity market normally take place during the six months from early November through the end of April, and that the subsequent six months are believed to be more difficult. And, indeed, that has been precisely the case over the past half century, on average.
And, as if on cue, the last half year has been a stellar one for the bulls. Moreover, in the prior two years, the May-through-October stretch has been a difficult one for those perennial optimists and, conversely, a good one for the bears. Now, with equities near their peak for the past several years, and coming off a strong first four months of 2012, the bears would seem to have a lot of things going for them, especially since the news out of Europe continues to be depressing and the tidings on our shores, particularly from an economic perspective, have been lackluster, at best, over the past few weeks.
That said, the bulls also have things going for them, most notably in the form of better-than-expected first-quarter earnings, as much of the corporate sector has outperformed the lowered profit expectations so far in the current reporting season. What's more, even after the strong recent run by the market, price-earnings ratios, while certainly not depressed, are at least reasonable from a historical perspective at just over 15, especially in a low-inflationary environment, such as now prevails by most measures.
As for the market, the bears did manage to end the latest month on an encouraging note--at least for them--as equities dipped throughout the session yesterday, finally finishing with modest overall losses. Not only were the major averages all lower, but there was a fairly substantial plurality of losing issues over gaining stocks, as once again some disappointments on the economic front at home and abroad held sway among traders. Most specifically, there was a government report out yesterday morning showing a marked deceleration in consumer spending during March. There also are reports out that large swathes of the euro zone are already in recession, and that this troubled economic confederation is rethinking its austerity approach. That does not figure to be a confidence-building development across the globe.
As for our own economy, in addition to yesterday's underwhelming spending report, we will get a succession of data issuances throughout the week that will likely have considerable bearing on the market's performance during the formative stages of May and perhaps beyond. The economic parade will, in fact, begin this morning, with the release of a report, some 30 minutes into the trading day, on U.S. manufacturing activity for April. Expectations are that this report will show a slowing in this key sector's rate of growth, along the lines of a similar release issued yesterday that detailed some easing in industrial growth in the greater Chicago area. We also will see surveys on construction spending and car sales today. Then, Thursday will bring the companion non-manufacturing survey along with data on jobless claims, while Friday is set to see the most closely watched of the economic reports this month, when the Labor Department issues its findings on job creation and the unemployment rate.
Meanwhile, talk of a recession over here is still muted, and with good reason, as the data points, albeit generally not overwhelming, are still far better than the metrics being issued across the sea, where this morning, stocks are generally lower again, especially in Germany and France. However, on these shores, following a weaker indication several hours earlier, the futures have eased slightly over to the plus side of the ledger, suggesting that we could start the month on a modest upnote. But May is still 31 days and plenty could happen between now and the end of the month, so stay tuned. – Harvey S. Katz
At the time of this report's writing, the author did not have positions in any of the companies mentioned.