After the Close - The stock market pushed higher for much of the session today, following yesterday’s weaker showing. The averages were able to extend this morning’s gains through much of the afternoon, but succumbed to some mild profit taking late in the day. At the close, the Dow Jones Industrial Average finished up 22 points (0.1%); the broader S&P 500 Index was ahead by six points (0.4%); and the tech-heavy NASDAQ, which was the leader today, jumped 24 points (0.7%). The rally was fairly broad, with advancing issues modestly ahead of decliners on the NYSE. The showing was bit better on the NASDAQ.
The technology stocks were the leaders today, helped by shares of computer hardware makers. Ultimately, strength in the technology sector is positive, as gains here may reflect true product innovation and expansion, rather than shifting commodity prices. The financial stocks also stood out, thanks to the mortgage-related issues. However, the REITs continued to lag the market.
Technically, the S&P 500 Index ended just above the 1,650 mark and a sideways trading range may be developing at this level. For many bulls, a period of range-bound consolidation would likely be preferable to a deeper correction, as it would give traders a chance to get comfortable with the market at the current level. Further, it would make it easier for traders to buy stocks, without feeling that they are chasing a runaway train. The VIX, now at about 14.50, moved slightly lower, likely indicating that bullish sentiment still prevails.
Meanwhile, the economic reports released today may have helped calm investors’ concerns about a reversal in Fed policy. Ultimately, traders are most comfortable with a “Goldilocks” economy (not too hot, and not too cold). That way, progress is still being made, but there are no signs of pending a tightening of the money flow, which is so important to Wall Street. This morning, weekly jobless claims came in at 354,000, a bit higher than had been expected. In an “ironic” sense, traders may have been relieved by that. Also, the second estimate for first-quarter GDP growth also came in just shy of expectations, at 2.4%.
There was some other news worth mentioning today. Joy Global (JOY) posted better-than-anticipated quarterly earnings, and the stock was up modestly. Also, Clearwire (CLWR) stock jumped on acquisition-related news. Perhaps, some M&A announcements could help push the market higher and keep optimism intact. - Adam Rosner
At the time of this article’s writing the author did not have positions in any of the companies mentioned.
12:00 PM EDT - Investors are taking the high road today, with stocks bouncing back from one of their biggest declines in weeks yesterday on renewed worries about the Federal Reserve tapering its bond-buying program.
At the noon hour on the East Coast, the Dow Jones Industrial Average is 81 points to the good and the NASDAQ is 29 points higher. Market breadth is firmly positive, with advancers outpacing decliners by about a three-to-two margin on the New York Stock Exchange.
It is not just the stock market that is hanging on the Fed’s every word, either. The bond market’s recent reversal from rates below 2% on the 10-year Treasury note to above that threshold has come about at least in part as investors try to stay ahead of the Fed’s expected moves.
Rising bond yields, in turn, have pushed 30-year mortgage rates to their highest level in a year, according to government agency Freddie Mac. Although homebuyers are still enjoying low borrowing costs, the average rate on a 30-year fixed mortgages has ticked up to 3.81% from 3.59% a week ago and 3.75% a year earlier. Rising interest rates have recently hurt shares of homebuilders, such as Toll Brothers (TOL).
Utilities stocks also have come off of their highs in the past several sessions with the shift higher in interest rates, although today sentiment toward that group is getting a lift as a result of Berkshire Hathaway’s (BRKB) announced purchase of NV Energy (NVE). At least for today, too, bond yields have paused in their move higher on a muted tone to this morning’s economic data.
In other corporate news, shares of EMC Corp. (EMC) are trading higher after the company said it would be initiating a quarterly cash dividend and boosting its share-repurchase program. The buybacks are designed to recharge the bottom line, which has flattened out a bit of late.
Elsewhere, a couple of retailers have reported divergent results. Costco (COST) issued better-than-expected earnings, and its shares initially rose, but have since given back their gains. Meantime, Big Lots (BIG) stock is selling off on disappointing results.
Also on the move are shares of Clearwire (CLWR). The company has received a higher takeover bid from Dish Network (DISH), which is in a bidding war with Sprint Nextel (S).
Heading into afternoon trading, the day’s uninspiring, but not terrible, economic news appears to have temporarily eased fears that Fed policy will soon become less accommodative. - 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 - Earnings season has begun to wind down, but there are still some important companies that are reporting today. Wholesale retailer Costco's (COST) fiscal third-quarter net income climbed 19 percent, bolstered by increased sales and more money from membership fees. Costco shares are indicating a slightly higher opening. However....
Clothing company Express Inc.'s (EXPR) net income fell 23 percent in the first quarter as it discounted more and dealt with higher costs for purchasing and store occupancy. But its results still topped analysts' estimates, and the issue is suggesting a nicely higher opening.
Elsewhere, in merger and acquisition news, satellite TV operator Dish Network Corp. (DISH) on Wednesday raised its bid for Clearwire Corp. (CLWR), valuing the wireless network operator at $6.9 billion, in an attempt to outbid Sprint Nextel Corp. (S) two days before Clearwire shareholders are meeting to vote on a deal. Dish's bid of $4.40 in cash per share is 29 percent higher than Sprint's bid of $3.40 per share. Sprint wants to buy the half of Clearwire that it doesn't already own. - Erik M. Manning
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market sold off yesterday, losing just about the same amount that it had gained on Tuesday. Once again, it was concerns about the Federal Reserve, specifically speculation that the lead bank could well start to slow down the rate of asset purchases as early as next month. It has been the successive bond-buying programs, dubbed quantitative easing, which have been behind much of the stellar performance on Wall Street over the past several years.
On Tuesday, by comparison, optimism engendered by a pledge from major bankers in Japan and across Europe that these financial leaders would remain monetarily supportive even if the U.S. Fed held back, along with upbeat metrics on these shores on consumer confidence and home prices. that managed to more than offset concerns about the Fed. As a result, stocks pushed notably higher on the day.
All told, the setback yesterday was moderate, and likely constructive given the somewhat frothy nature of current equity price levels, with the Dow Jones Industrial Average off 107 points, the NASDAQ lower by 21 points, and the small-cap Russell 2000 Composite in negative territory by more than 10 points, or just over one percent. Losing stocks, meantime, swamped gainers by almost four-to-one on the Big Board, and by better than two-to-one on the NASDAQ.
Once again, it was the high-yielding sector of the stock market that was punished most severely, with several such stocks in the Dow Jones Industrial Average, notably the drug makers and the telecoms, facing some serious selling, while the perceived riskier names generally fared a bit better. The apparent reason for this divergence, or sector rotation, is that bond yields are coming up and are seemingly once again being somewhat competitive for stocks. Of note, the yield on the 10-year Treasury note yesterday climbed to 2.15%. Now, that is certainly not a return that will whet the appetite of many fixed-income investors. But is does represent a sharp jump from early this month when that yield was just above 1.60%. In all, the 10-year Treasury's yield is at a 14-month high. Also, the 30-year Treasury bond is now yielding 3.29%; at its 52-week trough, that yield was well under 3.00%.
Now, a new day dawns and there are a pair of key economic reports that could conceivably have some minor impact on the performance of Wall Street in the hours to come. First, the Commerce Department reported that first-quarter gross domestic product growth had been revised slightly downward to show an advance of 2.4%. Last month, that initial estimate had come in at 2.5%. Also, the Labor Department reported that first-time jobless claims had increased to 354,000 in the latest week. That was more than expected, and higher than the prior week's 344,000 claims. Now, some apparently are reasoning that such a disappointing metric might dissuade the Fed from easing up on the monetary accelerator. Our sense continues to be that the Fed will stick with its aggressive stimulus a while longer.
Finally, the equity futures have responded nicely to the weaker jobs data, and after being lower early this morning, have rallied a bit and are suggesting a somewhat higher opening when traders get down to business in about a half hour from now. Bond yields, meantime, have tracked down a small bit following the weaker unemployment claims figures, and the 10-year yield is now at 2.12%. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.