After The Close - U.S. equities seesawed back and forth around the neutral line for much of the session today, as investors seemed reluctant to make major moves a day ahead of the U.S. Presidential Election. But some late-day buying did push the Dow Jones Industrial Average and the broader S&P 500 Index modestly higher by the closing bell. Meantime, the NASDAQ, helped by decent showings from a few prominent technology names, including industry leader Apple (AAPL), fared a bit better throughout much of the trading day. Overall, the margin between advancing and declining issues was razor thin on the New York Stock Exchange, which would attest to some of the lack of conviction on the part of investors today, despite the late-day flurry of buying. Advancers held a decent edge over decliners on NASDAQ, though.
From a sector perspective, it was a pretty even split among top 10 groups. The laggards were led by the utilities and consumer noncyclical areas. Financial and telecom stocks were also modestly weaker. Conversely, the materials, consumer cyclical (more below), energy, industrial, and technology sectors performed admirably today.
Speaking of technology, there was some notable news emanating from the area. As noted, shares of Apple moved higher after the technology behemoth said this morning that it already sold three million iPad minis since last Friday’s launch. The stock of Rogers Corporation (ROG) was also in demand after the supplier of communications equipment reported better-than-expected earnings; the earnings beat overshadowed a soft top-line showing in the latest quarter. Meantime, shares of Netflix (NFLX), which got a nice boost last week after it was revealed that billionaire financier Carl Icahn had taken a 10% stake in the struggling company, were up modestly again today as the company announced a poison pill plan to block a possible hostile takeover.
On the earnings front, shares of Time Warner Cable (TWC) fell after the media company posted disappointing third-quarter results. Conversely, shares of health insurer Humana (HUM), automaker Tesla Motors (TSLA), and electronics company Rockwell Automation (ROK), all moved higher after reporting quarterly financial data. Meantime, shares of Generac Holdings (GNRC) continued to surge, as investors believe that the company’s bottom line will benefit significantly from demand for backup and emergency generators in the wake of Hurricane Sandy.
Turning to the U.S. economy, the news was not overly uplifting, as the Institute for Supply Management reported that non-manufacturing activity increased more slowly in October than in September. All told, the Tempe, Arizona-based trade group affirmed that its gauge of the health of the critical services sector came in at a reading of 54.2 last month. That was less than both the consensus of 54.7 and the September reading of 55.1. Still, the survey result was in excess of 50.0, an indication that the services sector, which accounts for some two-thirds of the nation’s aggregate economic activity, is expanding. Investors seemed to be comfortable with the non-manufacturing data, as consumer cyclical stocks performed decently in the latest session.
Elsewhere, the European bourses were notably weaker today, particularly France’s CAC-40 and Spain’s IBEX-35. Pushing equities lower on the Continent were some uninspiring reports on the ongoing sovereign-debt problems in the euro zone. Over the weekend, Germany’s Chancellor Angela Merkel raised concerns after she said that the euro-zone crisis could still be another five years from a full resolution. The comments come at a time when talk has surfaced the International Monetary Fund is reportedly urging Greek debt holders to take a haircut to help the struggling country return to sustainable debt levels and the European Central Bank is investigating whether it broke its own collateral rules when lending to Spain’s banks. Yields on bonds in Spain and Italy jumped on the news, while the euro was slightly lower versus the dollar today. - William G. Ferguson
12:30 PM EST - The U.S. stock market had put in a sluggish performance so far today. However the major averages have moved off their lows, and have even turned positive in some areas. Just pass the noon hour in New York, the Dow Jones Industrial Average is off 15 points (-0.1%); the broader S&P 500 Index is down about one point; but the NASDAQ is ahead by four points (0.1%). Market breadth shows a mixed tone to the session, as advancing stocks are just about even with decliners on the NYSE. Some strength can be found in key market sectors. The consumer cyclical and technology shares are headed higher. But, there is some weakness in the utilities and financial names.
Notably, investors may be tentative about making commitments to the market, given the upcoming Presidential Election. The current election is one of utmost importance, given the nation’s still fragile economic recovery, and the resolution of the upcoming “fiscal cliff”.
Elsewhere, there were few economic releases issued today. But, the Institute for Supply Management’s Services Index did come in with a reading of 54.2 in October, which was lower than last month’s figure, and below the consensus forecast. Tomorrow, the economic news is also light, with the release of September’s consumer credit report and the weekly crude oil inventories.
Technically, the S&P 500 Index gave back some gains on Friday, and is now back near the 1,400 level, which may be of some “psychological” importance. Notably, the market, if unable to move higher, may consolidate, moving sideways, for a while. If the index heads lower, it may find some support at its 200-day moving average, located at about 1,380, which is only about 2.5% below the current level.
Meanwhile, the third-quarter earnings reports are still an issue. Although many high-profile companies have reported, some widely-held names are still in the spotlight. Today, we heard from Time Warner Cable (TWC). That issue is off sharply, on a disappointing release. Meanwhile, shares of Tesla Motors (TSLA) are up after the electric car maker affirmed its outlook.
Trading here in the U.S. is getting little help from the overseas markets. In Europe, the bourses were finishing up a weak day. Also, further east, Asia’s markets put in an uninspiring session overnight, as well. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Stocks to Watch from The Survey – The drumbeat of earnings news continues this morning, with companies such as health insurer Humana (HUM), automaker Tesla Motors (TSLA), and Rockwell Automation (ROK), a world leader in electronic controls, all reporting quarterly financial data. Shares of all three stocks are trading higher in the premarket. Shares of China-based Internet company Sohu.com (SOHU) are making an even more dramatic upside move ahead of the opening bell on earnings news.
On the other hand, investors appeared disappointed with quarterly results from Southern Company (SO), as shares of the electric utility are indicating a modestly lower opening this morning. The same is true for shares of Time Warner Cable (TWC), as the provider of cable and telecommunications services posted results that fell short of investors’ expectations. – Matthew E. Spencer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The old truism on Wall Street, which holds that investors often "buy on the rumor and sell on the news'' was likely in effect over the final two days of the hurricane-shortened week. Specifically, after a surprisingly good report from Automatic Data Processing (ADP) on private-sector job creation in October, which was issued on Thursday morning before the stock market opened, helped push equities strongly higher for that session, that upbeat data were followed on Friday morning by a much better-than-expected survey from the U.S. Labor Department, in which the government reported that non-farm payrolls jumped by 171,000 in October.
That increase was materially higher than the prevailing estimate of some 120,000 jobs. What's more, job growth totals were revised upward for both August and September--and markedly so. True, the unemployment rate did tick up from 7.8% to 7.9%, but that was largely because more Americans had begun to look for work now that the labor market was on the mend. Such an outperformance would have been expected to lift the stock market following its release. However, the buying on Thursday on the very good ADP report, which had increased rumors that the aforementioned Labor Department issuance would be better than forecast, took much of the steam out of the market in the latest session. Thus, after an early uptick, the sellers entered the fray and pulled the market notably lower over the course of the day, with the leading averages losing just about all of what they had gained during the prior session.
Of course, there were other factors at work, including evidence that third-quarter earnings season was a less-than-compelling affair and rising estimates that the cost of Hurricane Sandy, which wreaked havoc along the East Coast, would be considerably more than initially estimated. In fact, the latest evidence is that the damage will total some $50 billion--about twice the initial estimate. And, our sense is that the final bill may be considerably higher than that. The logical hit to the economy could well be anywhere from 0.5% to 0.8% of GDP in the current quarter. And although some of that lost economic output will be made up in subsequent periods, some, of course, can never be, thereby further underscoring the real tragedy of this horrific natural disaster.
Finally, there is tomorrow's election, which is, according to almost all of the pundits, an even affair and one that is in considerable doubt. That applies mostly to the Presidential race between President Obama and former Governor Mitt Romney, but also to the House and the Senate races, where the latest views are that there will be no appreciable change in the makeup of these two contentious houses.
Meanwhile, a new week dawns, and it will be a comparatively light one as far as hard and scheduled economic news is concerned. However, we will be getting key data out later this morning from the Institute for Supply Management on non-manufacturing activity, where a somewhat lesser rate of improvement is forecast for October. Thursday then will bring reports on weekly jobless claims and the monthly trade gap. Finally, the University of Michigan will weigh in on consumer sentiment on Friday. Ahead of all this and one day before the election, we would expect few big moves in the stock market either today or tomorrow. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.