After The Close - The U.S. stock market opened lower today, but managed to firm up somewhat in the afternoon. Once again, the bargain hunters moved in to support equities, keeping the current rally intact, as traders got quite a few corporate reports to digest today. In the Dow, Cisco Systems (CSCO - Free Cisco Stock Report) delivered a decent report, but investors were concerned about the outlook, as that issue traded modestly lower. PepsiCo (PEP) stock was trading higher though, after the beverage and food company posted solid quarterly figures. Elsewhere, Century Link (CTL) announced that it would cut its dividend, sending the stock sharply lower. Meanwhile, there was some merger and acquisition news that caught trader’s attention. To wit, Heinz (HNZ) shares were up almost 20% on reports that Berkshire Hathaway and a private equity firm plan to acquire the company. M&A activity can help fuel bull markets and keep sentiment positive.
The economic news also was generally constructive today. Specifically, the weekly initial jobless claim came in lower than many had anticipated. Continuing claims also showed improvement. Tomorrow, we get a look at the economic activity in the New York region, an industrial production report, and the University of Michigan’s Consumer Sentiment figures.
At the close of the session, the markets were mixed. The Dow Jones Industrial Average was off 10 points; while the S&P 500 Index was up slightly, and the NASDAQ also managed to stay nominally in positive territory, as well. Market breadth was uninspiring, as declining issues outnumbered decliners by a narrow margin on the NYSE. The various sectors showed a divided market, too. There was strength in the consumer non-cyclical names, and gains in the conglomerates and basic materials issues. However, the consumer cyclical stocks weighed down the market, and there was weakness in the utilities.
Actively traded stocks that posted big advances today included: Constellation Brands (STZ) and Value Click (VCLK). Stocks that moved lower included: Weight Watchers (WTW) and Whole Foods Markets (WFM).
Technically, the S&P 500 Index has been drifting higher in very small increments. The market seems to be consolidating, while traders look for direction, particularly now that the earnings season is coming to a close. Notably, a pullback could well be in order at some time, as valuations may be getting stretched, and traders are sitting on sizable profits. We are going into a three-day weekend, so tomorrow may be a bit volatile.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:10 PM EST - Stocks are slightly lower today after Wall Street digested some discouraging news about the global economy. Word that the economies of Japan and the euro zone (including Germany) retracted a bit in the fourth quarter of 2012 chilled investor sentiment at the opening bell. These major trading partners of the United States also make up a large part of the customer base for Corporate America. Wall Street is concerned that profits may be hindered if Europe and Japan are not doing well.
Not all of the day’s business tidings were bad, however. The Labor Department reported this morning that this week’s initial jobless claims fell 27,000, to 341,000, although it is not clear how much the data were affected by last week’s snowstorm in the Northeast. Broadly speaking, the recovery in employment since the 2007-2009 recession has been steady, but only moderate. As the Federal Reserve has noted, a more complete comeback in the jobs market has been hampered by tighter credit conditions and deleveraging by consumers and governments around the globe.
At the noon hour on the East Coast, the Dow Jones Industrial Average is off 15 points, and the NASDAQ is down a couple of points. Decliners are outpacing advancers by a narrow margin on the Big Board.
In the plus column for the bulls today is a surprise bid by privately held 3G Capital and Warren Buffett’s Berkshire Hathaway (BRK/B) to buy ketchup giant H.J. Heinz (HNZ). The announcement sent Heinz stock soaring. Shares of Constellation Brands (STZ) are another big winner, as the company’s acquisition plans, which hit a snag with regulators in recent weeks, seem back on track.
Notable losers include shares of Weight Watchers (WTW) and CenturyLink (CTL). Weight Watchers offered up a 2013 business outlook that was disappointing and CenturyLink reduced its dividend by 25%.
Also weighing on the general tone of the market is last night’s disclosure by Cisco Systems (CSCO – Free Cisco Stock Report), a bellwether for technology demand, that economic weakness is lingering in Europe and government spending for gear is uncertain. We note that a steep drop in defense spending caused fourth-quarter GDP in the United States to edge lower. Further declines in expenditures on the part of Uncle Sam are soon planned, as well, if no action is taken by Congress. That prospect may be causing some concern for traders.
Stocks are listless heading into the afternoon session. It may take some indication that mandated government spending cuts set to take effect in March will be avoided for the market to regain the vigor it has shown these past few months. -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 – Headlines this morning are dominated by M&A news, as a number of major deals have been announced. First, Berkshire Hathaway (BRK/B), the holding company run by legendary investor Warren Buffett, in conjunction with private-equity firm 3G Capital, has struck a deal to acquire condiment and packaged foods giant H.J. Heinz (HNZ). The transaction is valued at $28 billion, including debt, and Heinz shareholders would receive $72.50 in cash, a 20% premium to the stock’s preannouncement closing price. HNZ shares are soaring in the premarket as a result, while Berkshire stock is down just slightly. Second, the long-anticipated merger of airlines AMR Corp., the parent of American Airlines, and US Airways Group (LCC) has been agreed upon. Assuming the deal is consummated, it would create the world’s largest airline by traffic. LCC stock is up modestly ahead of the bell. Finally, shares of Constellation Brands (STZ) are surging in pre-market trading, after the wine, beer, and spirits company announced an agreement with Anheuser Busch InBev (BUD) regarding the divestiture of the latter’s assets of Mexico-based peer Grupo Modelo. BUD stock is trading nicely higher in the premarket, as well.
Elsewhere, earnings season continues, and investors are digesting reports from a number of bellwether companies, such as network equipment giant and Dow-30 component Cisco Systems (CSCO – Free Cisco Systems Stock Report), carmaker General Motors (GM), soft-drink and snacks powerhouse PepsiCo (PEP), and insurer MetLife (MET). GM and PEP shares are up marginally ahead of the bell, while CSCO and MET are down slightly.
Other stocks making notable moves on earnings news include weight loss services provider Weight Watchers (WTW) and telecommunications company CenturyLink (CTL), which also cut its dividend. Both of those stocks are plunging in pre-market trading. Shares of grocer Whole Foods Market (WFM) are also down notably on earnings news. – 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 bulls tried to sustain Dow 14,000 yesterday, giving it a good try in the process. In the end, however, a lackluster report on retail sales activity in January, in which that metric rose, but by just 0.1%, and some concerns about proposals put forth the prior night by President Obama to raise the minimum wage, exerted enough pressure on certain stocks within the Dow Jones Industrial Average to push that 30-stock index back down below the 14,000 level. That made it two successful tries to close above 14,000 in the past fortnight only to have that level hold for just one session.
Now, this morning, the stock markets across the sea, notably in Europe, are pressing lower on weak data on Germany's economy. To wit, the markets on the Continent erased some early gains following a solid showing overnight in Asia, to move modestly lower this morning. Specifically, data issued earlier today noted that Germany's economy had fallen in the fourth quarter, much as ours had. The principal cause for this reversal was weak demand from other European nations. Germany, the Continent's strongest and largest economy, depends heavily on exports for its growth. With that market faltering badly due to weak economies across the euro zone, it is not surprising that Germany is also laboring. In all, earlier this morning, Germany's DAX was off by 0.6%; Britain's FTSE 100 was lower by 0.4%; and France's CAC-40 was in the red to the tune of 0.3%. Our futures, meantime, are in the minus column as well, with losses of three points in the Standard and Poor's 500 Index and almost nine points in the NASDAQ. The Dow futures are likewise faltering a bit at this time.
As to the markets yesterday, in addition to the Dow's 36-point drop, the S&P 500 lost a point, and the NASDAQ was off by 10 points. These were not material reversals by any stretch of the imagination. In fact, the advance-decline line was positive on both the Big Board and the NASDAQ, while the chief small- and mid-cap indexes managed small increases on the day.
As to individual sectors of the market, the financials were clear laggards, with JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report) leading the way lower in this category. In the metals, shares of Cliffs Natural Resources (CLF) ended the session sharply in the red on a massive fourth-quarter charge and a consequent sharp reduction in the quarterly dividend. Cliffs shares fell $7.32 points, or 20%, on the day. The closing price on that issue at $29.29 is near a 52-week low. Indeed, the 12-month range for that battered stock is $73.63 to $28.05. On the other hand, General Electric (GE - Free General Electric Stock Report) shares rose nicely yesterday on word that it is selling its remaining 49% of NBCUniversal. The buyer, Comcast (CMCSA), also saw its shares rise nicely on the day. It was not as good a session for McDonald's (MCD - Free McDonald's Stock Report), however. One of the proposals advanced by President Obama was for a $9.00-an-hour minimum wage. Should anything approaching that figure be passed, it would clearly crimp profit margins for the fast-food icon.
Finally, after the close of trading, Dow component Cisco Systems (CSCO - Free Cisco Stock Report) issued its quarterly results, and outdid profit expectations, though apparently not enough to lift the shares, which are now indicating a flattish opening when trading commences in less than an hour from now.
At the time of this article's writing, the author had positions in CMCSA and CSCO.