After The Close - The U.S. stock market opened higher this morning, pulled back sharply at mid day, but then rallied into the close. At the end of the session, the Dow Jones Industrial Average was up 81 points (0.6%); the S&P 500 Index was higher by 11 points (0.8%); and the tech-heavy NASDAQ tacked on 16 points (0.5%). Market breadth was largely favorable, as advancing stocks outnumbered decliners by about 2 to 1 on the NYSE. All of market sectors made strides today, with leadership in the financial issues. Notably, a sustained recovery in this previously-battered sector would suggest that the U.S. economic recovery has finally gained traction. The energy stocks were also strong performers, getting some help from higher crude oil prices today. Also, the consumer cyclical issues reasserted themselves with solid gains. In contrast, the utility stocks lagged most of the other groups.
Technically, the S&P 500 Index is holding up well, as it looks to move out of the sideways range established over the past few days. The late-day rally is always good to see, as it suggests an underlying commitment to equities on the part of traders. The VIX, which is often used to gauge sentiment, moved lower today. Notably, lower readings are often correlated with complacency, or overconfidence, on the part of traders.
The economic news went only so far to help the market this morning. Initial jobless claims for the week ended January 5th rose to 371,000, which was higher than most analysts had expected. The weekly continuing jobless claims actual came down a bit, and that may have helped offset some of the negative news. Elsewhere, wholesale inventories increased 0.6% in November, which was higher than had been anticipated, and may suggest that the outlook is still bright. Tomorrow, we get a look at the trade balance figures for November, as well as import and export prices for December.
The fourth-quarter earnings season has officially started with the Alcoa (AA - Free Alcoa Stock Report) release. Today, shares of Tiffany (TIF) slipped, as the upscale jeweler turned cautious on its guidance. Ruby Tuesday (RT) headed lower after the restaurant operator posted weak results and announced that it would be closing some locations. Meanwhile, banking giant Wells Fargo (WFC) is set to put out its numbers tomorrow, in what will be a widely-watched release. - Adam Rosner
At the time of this article's writing, the author had a position in Alcoa (AA).
12:15 PM EST - Wall Street’s efforts to take stocks higher today, on the heels of some favorable economic data out of China and generally constructive comments from European Central Bank President Mario Draghi, have run into some resistance.
From China, word came that exports jumped in December, bolstering the view that the world’s second largest economy is on solid growth footing. And the scenario laid out by ECB President Draghi for a gradual recovery in Europe in 2013 offered some hope for the beleaguered currency union.
Back home, this morning’s initial jobless claims reading, while a bit higher than expected, was not seen as worrisome. Meanwhile, a rise in wholesale inventories pointed to higher sales.
Even so, at just past the noon hour on the East Coast, the major averages are mixed, with Dow Jones Industrial Average up 17 points and the NASDAQ off slightly. The broader market’s undertone is slightly to the good, with gainers outpacing decliners by a narrow margin on the New York Stock Exchange.
Stocks were trading higher earlier this session, but some disappointment that the ECB did not reduce interest rates contributed to a sharp selloff on the European bourses, which seemed to have a spillover effect here. Nevertheless, investors are relieved that issues stemming from Europe’s woes have quieted down. One telling factor of the less-troublesome outlook is the drop in interest rates on Spain’s 10-year government bonds to under 5% for the first time since March, 2012.
Among the market’s various sectors, there are pockets of strength. Financial stocks, such as Bank of America (BAC – Free BofA Stock Report) and Morgan Stanley (MS), are doing well. Morgan Stanley’s announcement of a cost-reduction plan has lifted sentiment toward the shares.
Certain consumer stocks are also trading higher. Those include Ford Motor (F), which doubled its quarterly dividend, and furniture maker Tempur-Pedic International (TPX).
Meantime, shares of Hess (HES) and Continental Resources (CLR) are benefiting from higher oil prices.
On the down side, shares of retailers Tiffany (TIF) and Aeropostale (ARO) are taking it on the chin. Tiffany indicated that sales were at the low end of expectations and Aeropostale reduced its earnings outlook for the fourth quarter.
There is a chance that stocks will regain their footing in afternoon trading now that markets in Europe have closed, and assuming the focus reverts back to the day’s predominantly positive business and earnings news. - Robert Mitkowski
At the time this article was written, the author did not have positions in any of the companies mentioned.
Stocks to Watch from The Survey – Retail stocks are in the headlines this morning, as a number of companies have released holiday-period sales figures and updated January-quarter guidance. Shares of apparel retailers Aeropostale (ARO), Ascena Retail Group (ASNA), and AmericanEagle Outfitters (AEO) are all trading lower in the premarket (ARO and ASNA shares are down sharply, while AEO is poised for a more modest decline). Shares of jeweler Tiffany & Co. (TIF) are also down notably ahead of the bell. On the bright side, Urban Outfitters (URBN) stock is trading slightly higher in the premarket.
Elsewhere, shares of Ruby Tuesday (RT) are down meaningfully in pre-market trading, after the restaurant operator delivered a lackluster November-period earnings report after the market closed yesterday. On the other hand, shares of Nokia (NOK) are soaring ahead of the bell, after the cell phone manufacturer released preliminary fourth-quarter financials that were better than expected. The stock of SUPERVALU (SVU) is also surging in the premarket, on news that the grocer has struck a deal to sell five of its grocery store chains to an affiliate of Cerberus Capital Management in a transaction valued at roughly $3.3 billion. SUPERVALU also reported November-period results. – 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 - Well, so much for the profit taking. Indeed, after back-to-back sessions of modest selling, in which the Dow Jones Industrial Average had posted losses of a little more than 50 points each day, while the other averages dipped slightly, the market came back yesterday with decidedly more vigor. True, the averages did little more than erase about half their combined two-day losses, as the Dow added 62 points and the other averages posted small gains. Still, the overall tone of the market was quite bullish, as the Big Board showed more than a two-to-one plurality of gaining stocks over losing issues, while the NASDAQ did almost as well.
Behind the reassertion of the bulls was some optimism ahead of fourth-quarter earnings season, which, in part, may have been sparked by a decent profit and revenue showing by aluminum giant and Dow-30 component Alcoa (AA – Free Alcoa Stock Report). That beaten-down basic materials provider earned a mere six cents a share in 2012's final period, but that was right on target, compared favorably with the prior year's loss, and was aided by a somewhat better-than-expected revenue performance. However, in absolute terms, the top line still eased a bit. Interestingly, Alcoa saw its stock open nicely higher, but end the session off by two cents a share.
There wasn't much else of note to embolden the bulls, as economic reports were sparse once again, and we are still some time away from the late-February deadline for the two parties in Washington to come to terms on a deal that will formulate spending reductions and an extension of the country's borrowing limits. Given how contentious the tax-cut accord negotiations were, there is every reason to believe that the pending compromises on spending and borrowing, should they, in fact, be fashioned by the deadline, will be even a bit more divisive.
However, for now, with the latest crises in Europe on hold; the news out of the fractious Middle East light; the economic tidings in China at least neutral, if not supportive; the economy making scarce headlines at home; and few paying much attention to the comings and goings in the Capitol, the buyers have moved into the market. For the next fortnight, or so, the focus is likely to be on earnings, in the absence of headline events of either a global or a domestic nature. And on the profit side, expectations are low, so it is possible that we could well see some outperformance, on average. That would also prove supportive. That said, the deadlines in Washington are approaching, and the political news could shortly begin to have an effect. That might not be helpful to the bullish cause, if the recent past is any guide, as stocks generally faltered late last year.
As to the near-term future on Wall Street, we will be looking at a succession of pivotal earnings reports in the coming days, starting tomorrow with results from banking behemoth Wells Fargo (WFC), and continuing next week with data from more than 10 Dow-30 companies. Meanwhile, in Asia overnight, Japan's Nikkei and the Hong Kong Hang Seng indexes were notably higher, while in London this morning, the FTSE 100 is incrementally in the plus column, while on our shores, we are seeing gains of eight and 18 points, respectively in the Standard and Poor's 500 Index futures and the NASDAQ futures. This presages a continuation of the latest rally, at least at the start of the trading session. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.