After The Close - Stocks traded moderately lower today ahead of Federal Reserve Chairman Ben Bernanke’s testimony before Congress tomorrow. At the close, the Dow Jones Industrial Average was down 32 points and the NASDAQ was off nine points. Market breadth was decidedly negative, with nearly two stocks falling for every one gaining on the New York Stock Exchange.
The day’s news on the economy was decent, with industrial production in June rising a bit more than expected. Inflation was mostly tame last month, as well. However, there is a bit of concern over rising gasoline prices, which have jumped in the past couple of weeks. The disruptive events in Egypt have led to fears the Suez Canal, through which Middle East oil is shipped, could be potentially closed if violence in that North African nation were to escalate. The resulting higher oil prices have translated into consumers paying more at the pump which, if sustained, could cut into consumer spending.
Meantime, profits reports from a couple of big-name corporations failed to inspire investors. Coca-Cola (KO - Free Coca-Cola Stock Report) stock dragged the Dow down when the soft drink giant reported lower-than-estimated revenues, adjusted profits that only met expectations, and a weak overall volume trend.
Shares of Charles Schwab (SCHW) also backed off when the discount broker noted that rising expenses cut into profits more than anticipated. Schwab stock had been rallying in recent months, apparently on the thinking that a move toward higher interest rates was drawing closer. Such a trend might eventually allow the company to reinstate the sizable fees on its money-market funds that it has had to waive over the past several years, with short-term interest rates at historic lows.
Today was a day when even stocks of companies that beat Wall Street’s expectations didn’t fare especially well. Included in that category were Dow component Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report) and Goldman Sachs (GS). Lackluster performance at JNJ’s medical device segment may have hurt sentiment toward its stock, and an analyst downgrade seemed to undercut Goldman.
Tomorrow brings a full plate of earnings releases from a number of Dow components, including American Express (AXP - Free American Express Stock Report), Bank of America (BAC - Free Bank of America Stock Report), Intel (INTC -Free Intel Stock Report), and IBM (IBM - Free IBM Stock Report). Except for Intel, year-over-year gains are expected. There will also be economic data to digest, in the form of housing starts and building permits for June, which are projected to have advanced since May. And, as noted, Fed Chairman Ben Bernanke will detail his thoughts on the economy and central bank policy, in what has been a distinctly Fed-focused stock market. - Robert Mitkowski
At the time of this writing, the author had a position in Intel.
12:30 PM EDT - The stock market made a few attempts to move higher this morning, but has since turned lower. As we pass the noon hour in New York, the Dow Jones Industrial Average is off 38 points (-0.3%); the broader S&P 500 Index is down seven points (-0.4%); and the NASDAQ is shedding 10 points (-0.3%). Market breadth indicates some underlying weakness to the session, as declining stocks are outnumbering advancers by about 2 to 1 on the NYSE. Most of the market sectors are surrendering ground today. Many of the consumer names are especially weak. However, some areas of the market are holding up well. For instance, the precious metals miners are having a good session. Gold is trading higher, now at $1,288 an ounce.
Technically, the S&P 500 Index is taking a breather today. This is understandable, and even healthy, as the broad index has made a dramatic push higher, with little pause, over the past several sessions. Usually when this happens, market conditions can become ‘overbought” at least for traders with a short-time horizon. Also, it is not uncommon for the market to encounter some resistance near a new high. So, it may take a few attempts for traders to get comfortable with equities at their current levels, and to initiate further buying. The VIX is trading slightly higher today at just over 14.
The economic reports released today likely have had little to do with the market’s pullback. The Consumer Price Index rose 0.5% in June, which was a bit more than had been expected, and may have those traders watching for inflation concerned. However, the core CPI rose only 0.2% in June, which met expectations. Elsewhere, industrial production increased 0.3% in June. While this modestly beat expectations, it was a notable improvement over the unchanged reading logged in May. Further, the housing market continues to strengthen, as the National Association of Home Builders Market Index improved to 57 in July, which was well above the consensus view. Nonetheless, this news is not helping home building stocks much, as these issues are off sharply.
Since it is earnings season, there are a few reports worth mentioning. Dow component Coca-Cola (KO - Free Coca-Cola Stock Report) is seeing its stock slip, after the soda giant put out mixed results. Goldman Sachs (GS) stock is trading lower too, even after the investment bank logged better-than-expected results. -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 – Earnings season is heating up and there are a few high-profile reports out today. Investors appear pleased with quarterly results from healthcare company and Dow-30 component Johnson & Johnson (JNJ – Free Johnson & Johnson Stock Report), investment bank Goldman Sachs (GS), and crop nutrient and animal feed producer The Mosaic Company (MOS), as all of those equities are trading slightly higher in the premarket. The same can’t be said for beverage giant Coca-Cola (KO – Free Coca-Cola Stock Report), however, which delivered tepid volume growth and disappointed investors. The stock is indicating a moderately lower opening this morning as a result. Shares of Cintas Corp. (CTAS) are also down in pre-market trading, after the uniform supplier’s May-period earnings missed estimates and its outlook failed to impress Wall Street.
In other news, lottery and casino game maker Bally Technologies (BYI) has struck a deal to acquire industry peer SHFL Entertainment (SHFL) for $23.25 a share, which represents a 24% premium to SHFL’s preannouncement closing price yesterday. SHFL stock is soaring ahead of the bell, and BYI shares are up nicely, as well. – 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 new week on Wall Street started off with a whimper, as the major equity averages moved about in a narrow range, passing up the chance for a little profit taking in an overbought stock market, but also being reluctant to advance aggressively with the upcoming succession of earnings reports on the immediate horizon.
In all, after a slightly lower opening, stocks quickly moved into the black, but never with much conviction, proceeding to spend the lion's share of the day in generally positive territory. By the close, the gains were largely forgettable, especially in the large-cap area, with the Dow Jones Industrial Average and the NASDAQ up by 20 points and seven points, respectively. There was a somewhat better showing in the small- and mid-cap arena, where the Russell 2000 Index gained a more imposing seven points, or two-thirds of a percentage point. Underscoring this fairly broad, but not impressive, rally was the nicely positive advance-decline ratio on the Big Board and the NASDAQ.
The few news items of note, meantime, that might have had an influence on the day's action, were an unprepossessing 0.4% gain in June retail sales, and a better-than-expected profit showing from banking giant Citigroup (C). The former report, which affirmed an increase that was just half of the forecasted 0.8% rise in consumer spending last month, likely limited the day's market strength, while the better Citigroup news, which helped to propel the financial issues nicely higher, helped the advance.
Overall, our sense is that the pressure may be starting to build on the bulls, especially since the stock market has been on a strong upward path over the past fortnight following some earlier hesitation in the wake of a feared cooling down in monetary stimulus by the Federal Reserve. More recent comments by Fed Chairman Ben Bernanke to the effect that the Fed would be in no rush to pull the plug on record low interest rates, even if it slowed the pace of bond buying later this year, has done much to calm the nerves of the bulls. It should be noted that the Fed Chairman will amplify his earlier remarks later this week when he intones on the economy and Fed policy, once again.
For now, though, the more immediate focus is on second-quarter earnings reports, which will start to come out en masse today and over the course of the next four days when fully 10 of the 30 Dow Jones Industrial members issue their quarterly statements. Of note, in this group, pharmaceuticals and medical supplies giant Johnson & Johnson (JNJ – Free J&J Stock Report) issued a solid report, especially on the revenue line, and that blue chip issue is indicated slightly higher in the pre-market. Also reporting already today was Goldman Sachs (GS), with the investment banking behemoth reporting that it earnings had doubled in the latest quarter. Goldman shares are also showing some early indicated strength in the pre-market. All told, that issue has now nearly doubled in price from its earlier 52-week low.
Overall, the equity futures are pointing to a mixed opening ahead of some key economic data--especially the 9:15 (EDT) release of the industrial production data for June, with the S&P 500 futures off by about a point and the NASDAQ futures up modestly. This early action follows a generally lower market trend in Europe. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.