After the Close - The stock market opened higher this morning and managed to extend its gains into the late afternoon. At the close of the session, the Dow Jones Industrial Average ended up 150 points (1.0%); the broader S&P 500 Index was ahead 15 points (1.0%); and the NASDAQ tacked on 28 points (0.9%). Market breadth was decidedly favorable, with advancing stocks outnumbering decliners by about 3 to 1 on the NYSE.
Most of the market sectors moved higher today. There was notable strength in the healthcare and consumer issues. Notably, the biotech issues moved up sharply. Also, the utility stocks, many of which have lost ground lately, logged an impressive rebound. In contrast, there was some weakness in the basic materials sector, as these stocks actually traded lower today. Specifically, the gold and silver issues lost further ground. Gold was off about 4% today to about $1,230 an ounce. For some perspective, the precious metal was about $1,700 an ounce in January, which simply demonstrates how volatile commodities can be especially when they fall out of favor.
Technically, the S&P 500 Index staged a rebound yesterday, accompanied by strong trading volumes. Today, we saw some follow through, which is encouraging. Furthermore, today’s move pushed the S&P 500 Index back above the “psychologically significant” 1,600 level, which was good to see. Assuming the index can move higher from here, it may encounter some resistance at the 50-day moving average, located at 1,620. So, this will be a crucial area to watch. Clearly, for now traders are feeling better about the situation as the VIX is lower by about 7%, to 17, today.
Traders may have been relieved by today’s economic news. The third estimate for first-quarter GDP showed an advance of 1.8%, which was less than previous figures, and also below the consensus view. In an ironic way some traders may be thinking that a slower-than-hoped for recovery will keep the Fed from reversing its monetary policy too quickly. Tomorrow, we will get a look at the weekly initial and continuing jobless claims, and that will likely play a role for traders.
There were a few earnings announcements made today. Specifically, we heard from Monsanto (MON). That issue traded lower on a mixed release. PAREXEL (PRXL) shares were lower, even though that company confirmed its quarterly guidance. - Adam Rosner
At the time of this article’s writing the author did not have positions in any of the companies mentioned.
12:10 PM EDT - The rollercoaster ride for equity market participants continues. After three out of four trading sessions since last Wednesday that saw equities plummet, the bulls returned with a solid showing yesterday and the buying has continued thus far today. As we approach the midday hour on the East Coast, the Dow Jones Industrials, the NASDAQ, the broader S&P 500 Index, and the small-cap Russell 2000 are all nicely higher. Overall, advancing issues a hold notable lead on decliners on both the Big Board and the NASDAQ, suggesting there might be some near-term staying power to the move made by the bulls.
As has been the case for quite some time now, trading is being driven by actions and remarks from the world central banks. Yesterday’s reaction from officials at People’s Republic China bank that fears of a credit crunch in the world's second largest economy were overblown, and that the lead bank was clearly not intent on bringing on such a crisis comforted the international investment community. Investors were also pleased to hear comments earlier today from European Central Bank President Mario Draghi that the central bank there was ready to act again if needed. Mr. Draghi also noted that recent stimulus efforts have worked, but monetary policy alone can’t create real economic growth. These remarks, along with data showing that U.S. GDP growth was revised lower for the first quarter (more below) are giving a boost to stocks, both here and abroad. In addition to the nice advances seen here, the European bourses are sharply higher as trading draws to a conclusion on the Continent.
Meantime, investors appear to think that the lower first-quarter GDP reading (it was revised from 2.4% to 1.8%) is a sign that the Federal Reserve will likely continue providing support through bond buying. However, our sense is that the Fed’s near-term action will be based more on second-half 2013 economic production, which may well prove to be on the upswing. Recent data on the consumer and the housing market, two important sectors of the economy, have been favorable.
From a sector perspective, most of the 10 major groups are in positive territory, but like the overall market, are off of their earlier highs. Despite the aforementioned downward revision to first-quarter GDP, the growth (i.e., financial, industrial, and consumer discretionary) sectors are showing some relative strength. The same can’t be said for the basic materials stocks, which are once again under pressure. They are joined in the red by telecommunications issues.
It is also worth noting that after a sluggish start interest in fixed-income securities has picked up a bit. The yield on the benchmark 10-year Treasury note, which moves in the opposite direction to the price and has been on an upward trajectory in recent days, is currently down around five basis points.
Elsewhere, the downward spiral in gold prices continues, likely prompted by the recent strength of the dollar versus a basket of foreign currencies. The price of gold is down more than $40 an ounce thus far today, hitting its lowest level in three years in the process. Growing sentiment that was supported by remarks from the Federal Reserve last week that the U.S. economy is on better footing these days is prompting the selloff of the commodity. In recent years, the price of gold moved higher on growing demand for the precious metal, it was viewed as a safe-haven in troubled financial times, which doesn’t appear to be the case right now.
Looking ahead, the bulls are in position to make it two consecutive winning sessions on Wall Street. However, using recent trading as a guide, we can’t rule out the possibility of some turbulence on the way to today’s closing bell. But as of this moment, things are looking positive for those long equities. Stay tuned. - William G. Ferguson
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 – Earnings reports continue to trickle in today, though investors have found little to their liking, at least in the premarket. Indeed, shares of cereal and packaged foods company General Mills (GIS), Apollo Group (APOL), a provider of higher education programs primarily to working adults, and Monsanto (MON), which develops technology-based solutions and agricultural products for growers, are all indicating lower openings this morning on earnings news. On the other hand, the stock of Smith & Wesson (SWHC) is up just slightly ahead of the bell, after the firearms manufacturer reported solid April-period results and an upbeat outlook. – 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 rollercoaster ride continues on Wall Street. Thus, following the notable market declines of last Wednesday and Thursday, the essentially neutral action on Friday, and the resumption of the selloff on Monday, stocks rallied anew yesterday. This solid showing, which featured gains of 101 points, 27 points, and 15 points, respectively, in the Dow Jones Industrial Average, the NASDAQ, and the Standard and Poor's 500 Index, was the first measurable improvement in the market since Monday and Tuesday of last week.
Meanwhile, it was not the major catalyst for the recent selling--the U.S. Federal Reserve--that helped to apply the brakes to the latest slide, but rather the central bank of China, which suggested that fears of a credit crunch in the world's second largest economy were overblown, and that the lead bank was clearly not intent on bringing on such a crisis. That was all that the global markets needed to hear. Not only did the U.S. market firm up, but so did the bourses across Europe.
At the same time, the latest session was dominated by a trio of strong economic reports. Specifically, before the market opened on our shores, the Commerce Department reported the second straight healthy monthly increase in orders for durable goods, with that metric rising by 3.6% in May. Then, 30 minutes into the trading day, that same governmental agency noted that new home sales had perked up anew last month, jumping on an annualized basis to near five million units. At the same time, the Conference Board noted that consumer confidence had swelled in June, rising to a reading of 81.4--the best such score since 2008.
Normally, such solid reports would have unleashed the buyers, but good news is not always given a warm reception on Wall Street these days, as such tidings increase the chances that the Federal Reserve, the principal contributor to the market's recent weakness, will opt to act on its suggestion, announced last Wednesday, that it plans to slow down, then end, the ambitious bond-buying in place for the past several years. Fears that the Fed could harm the business expansion have arisen since the lead bank announced that possible policy shift last week.
Now, though, a new day dawns on Wall Street, and for the moment, at least, bullish sentiment remains in place. To wit, supportive musings and signals from the European Central Banks and moves, earlier noted by China to calm the banking sector fears, are at work this morning to reduce global market fears emanating from suggested moves for a reduction in U.S. stimulus. Global stocks are therefore rallying following their recent setbacks.
One asset class that did not rally yesterday, meantime, were bonds, as the yields on both the benchmark 10-year Treasury note and the companion 30-year Treasury bond rose once more, with the return on the former fixed-income instrument climbing to 2.59%. So far this morning, though, yields are off modestly, with the 10-year note now passing hands at 2.57% and the 30-year bond's rate easing to 3.60%.
As to our markets, they are joining the general uptrend around the globe, as the Standard and Poor's 500 Index futures are now up by nine points and the NASDAQ futures are better by just over 20 points. Thus, as things stand now, the bulls would seem poised to attempt to make it two up days in succession. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.