After The Close - The final day of the trading week was a middling one for most of the session. However, there was a bit of selling over the final few hours, but we would not read too much into the late-day pullback as it occurred on light volume ahead of the long Memorial Day Weekend and it was pretty selective, with most of the weakness confined to the Dow Jones Industrial Average. Too, the spread between advancing and declining issues was narrow, yet another indication there was not much conviction on the part of market participants. At the closing bell, the NASDAQ and the S&P 500 Index were relatively unchanged, while the Dow Jones Industrial Average was down 75 points. Weighing on the performance of the index of 30 bellwether companies were the stocks of oil giants, Exxon Mobil (XOM - Free Exxon Stock Report) and Chevron (CVX - Free Chevron Stock Report), as well as the shares of International Business Machines (IBM - Free IBM Stock Report), Caterpillar (CAT - Free Caterpillar Stock Report), and Boeing (BA - Free Boeing Stock Report).
Among the 12 major sectors, the financial, capital goods, and basic materials groups suffered the biggest losses today, likely weighed down by the aforementioned weakness in the Dow-30 components. Meanwhile, some of the larger technology names, including Apple (AAPL), Google (GOOG), and Facebook (FB), finished in negative territory, pulling the NASDAQ Composite nominally into the red with a two-point loss.
Today’s lackluster performance capped what was a highly volatile, but at times decent, week of trading on Wall Street. In the process, the major U.S. equity indexes were able to recoup a small percentage of the prior week’s losses. For the five-day stretch, the Dow 30, the tech-heavy NASDAQ, and the broader S&P 500 Index were up 0.7%, 2.1%, and 1.7%. While the partial retracement of last week’s sharp losses was encouraging, it is our sense that investors are still very concerned about the situation in the euro zone (more below) and remain hesitant to commit further to equities. Investors still appear to be adhering to a “flight-to-safety” strategy”. The yield on the 10-year Treasury note, which moves in the opposite direction to the price, finished the week at 1.75%, a strong indication that demand for fixed-income securities, which typically carry less risk, is still pretty high.
Meanwhile, despite one less trading day next week, there will be no shortage of news on the economy. On Tuesday, we will get data on consumer confidence as well as the latest S&P Case-Shiller reading on home prices. Then, on Wednesday, data on the jobs market begins to roll in with Automatic Data Processing’s (ADP) report on private-sector payroll creation. The revised first-quarter GDP figure and initial weekly unemployment claims will be the focus of investors on Thursday. The busy week concludes on Friday with reports on employment and unemployment, manufacturing activity, personal income and spending, and vehicle sales. With earnings news once again light, our sense is that the economic results, as well as the tidings from Europe, will play a big role in how the equity market performs next week.
Speaking of Europe, the major bourses finished modestly higher today. The unsettling situation in Greece, which has weighed on the performance of European stocks over the last fortnight, didn’t appear to be on the minds of traders today. Instead, investors focused on data showing consumer confidence is stabilizing in Germany. According to market research group GfK, the overall confidence indicator held steady at 5.7 points in May and is expected to remain near that level in June. This positive reading, along with yesterday’s comments from Italy's premier that Greece would likely stay in the euro zone, lent some support to equities on the Continent. Too, the euro, which has fallen sharply in recent days, finished flat versus the dollar in the latest session. - William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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12:15 PM ET - The U.S. stock market is somewhat weaker today. However, it should be noted that many traders probably don’t want to make commitments in front of a three-day weekend. At roughly noon in New York, the Dow Jones Industrial Average is down 26 points (-0.2%); the S&P 500 Index is ahead by just one point; and the NASDAQ is off one point. Market breadth shows a mixed tone to the session, as advancing issues are just even with decliners on the NYSE, and the NASDAQ. The various market sectors also show a largely divided result. There is some strength in the energy stocks. This may reflect slightly higher crude oil prices today. There is also some strength in the conglomerates. In contrast, weakness can be found in the basic materials and capital goods shares.
Meanwhile, the markets overseas had a directionless session, although they managed to finish with slight gains. The general tone on the Continent seems to be better, as fears that Greece will exit the euro zone have become less exaggerated.
Meanwhile, the economic news in the United States has been minimal. However, we did receive one a report. The University of Michigan’s Consumer Sentiment Survey registered a final reading of 79.3 for the month of May, which was better than expected. We get a more in-depth look at consumer confidence on Tuesday of next week, when the Conference Board issues its report. Following this, the economic data will be heavy later in the week, leading up to the Government’s non-farm payroll report for the month of May. Given the current employment situation, this issuance will be carefully watched.
In corporate news, it has been a quiet day. Shares of Verifone (PAY) are trading sharply lower after the company issued disappointing guidance. In technology, shares of Mentor Graphics (MENT) are also off sharply, after that company posted decent profits, but weaker-than-expected revenues.
Technically, the S&P 500 Index has been struggling to hold its ground after the big rally logged a few days ago. Volumes have been increasing, and there has been significant volatility. However, apart from some late day bargain hunting, there has been little in the way of meaningful and constructive follow through. A few more strong days are likely needed. This would show some conviction on the part of the bulls, and help improve overall investor confidence. - 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 – The flow of earnings news has slowed to a trickle at this point, though investors are still digesting a few quarterly reports. For example, shares of VeriFone Systems (PAY) are down sharply in pre-market trading this morning. After the market closed yesterday, the designer and marketer of point-of-sale electronic payment devices and security software announced lackluster earnings, despite a solid top-line showing. Moreover, the company's outlook did little to sooth investors. On the other hand, shares of semiconductor company Semtech Corp. (SMTC) are up slightly in early morning trading on April-quarter results.
Computer maker Dell (DELL) is reportedly in talks to buy Quest Software (QSFT), a provider of enterprise systems management software. Dell made a bid for Quest several months ago, but it agreed to a buyout offer from private-equity firm Insight Venture Partners. Quest shares are up moderately in the premarket.
Talbots (TLB) stock plunged in pre-market trading on news that a potential buyout by private-equity firm Sycamore Partners has fallen through. The retailer of women’s apparel and accessories also released April-period results and said that it will continue to explore strategic alternatives. – 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 - Yesterday, for a second time in as many sessions, the equity market reversed course during the day. This time, unlike Wednesday when a 191-point loss in the Dow Jones Industrials was erased, the late rally was much less dramatic. In all, a mid-session 75-point drop in the Dow was overcome, and then some, by a final-hour buying binge, which pushed that index to a closing gain of almost 34 points. The Standard and Poor's 500 Index followed suit, going from an eight-point loss to a nominal two-point gain. But the tech-heavy NASDAQ, hurt by better-than-five point setbacks in the shares of both Apple (AAPL) and Google (GOOG), could not recoup all of an early 33-point loss, or more than one percent, and ended the trading day still 11 points in the red.
Once again, as has been the case all week, it was angst over the troubles in the euro zone, most recently the strong possibility that debt-mired Greece could exit from that economic confederation that gave the bears their early confidence. Hopes that a better ending would evolve in that soap opera and some additional positive tidings from the U.S. economic sector, where we received the report of a modest upturn in April durable goods orders following a sizable decline in March, helped to limit the selling, and may have induced some selective buying later on.
The better U.S. economic news also included a small decline in weekly jobless claims, and back-to-back reports of rising new and existing home sales for April, issued on Tuesday and Wednesday. Such data suggest that the feared recession, now apparently on the way in Europe, will miss our shores in the months to come.
Meanwhile, the late buying, occasioned on Wednesday by some optimism about a possible breakthrough on the euro-zone front, was apparently underpinned yesterday by comments from Italy's premier that Greece would stay in the euro zone. We shall see what lies ahead on that ever-changing front. Our sense is that the situation is in flux and that there will be many rumors and denials to come in the weeks ahead before anything definitive on that score is affirmed. In the meantime, the fluid situation could keep equity market volatility high on both sides of the Atlantic for some time yet.
Looking ahead, the markets face one key economic report this morning, with the release on Consumer Sentiment from the University of Michigan. This is the final reading for May, and expectations are that the index will come in at a 77.8 reading, which was the same as the prior result. That performance, or something approaching it, should not have an impact on trading. As has been the case all week and, indeed, for the past number of weeks, it should again be Europe that holds Wall Street's interest, and there the issues are not yet well in place. That region is a hotbed of uncertainty, and the latest goings on do not figure to lessen the tension very much. So far, however, the European bourses are all pressing higher, an improvement, though, that has not moved over to our shores, as the U.S, equity futures are easing at this time, with the S&P 500 Index futures and the NASDAQ futures now both headed a bit lower. This all suggests a middling start to the last trading day before the long Memorial Day Weekend., which we hope will be a happy, safe, and reflective one for all. - Harvey S. Katz
At the time of this article's writing, the author did now have positions in any of the companies mentioned.