After the Close - Wall Street shook off the Summertime Blues and rose for the first time this week today. At the close of trading, the Dow Jones Industrial Average was 27 points higher and the NASDAQ was 15 points to the good, or comparatively stronger than the Dow. The broader market confirmed the advance, with gaining stocks outpacing decliners by about nine to five on the New York Stock Exchange.
It was nice to see stocks come out of the mild slump they experienced this week. However, it wouldn’t be all that surprising to see further profit-taking ahead, given that the Dow was up 18% coming into today’s session. An 18% advance would be an excellent full-year performance, and it is still only early August.
Moreover, while the earnings season now winding down went okay, the focus may shift to a projected less-investor-friendly policy change on the part of the Federal Reserve, which is looking to start trimming back its bond-buying spree. Such concerns are periodically taking a toll on sentiment, particularly when various Fed officials affirm that a toning-down in strategy is being bandied about, as occurred earlier this week.
Helping stocks today was favorable news on China’s economy, where both imports and exports rose more than expected. That pushed up stocks in the basic materials sector. Mining shares, including those of Freeport-McMoRan Copper & Gold (FCX), Newmont Mining (NEM), and Barrick Gold (ABX), shined, as a result.
Also in the plus column for equities was another low reading on weekly initial unemployment claims, offering the promise of more jobs and income for consumers.
Elsewhere, data on U.S. same-store sales indicated a 4.2% rise in July, but some reports indicated that retailers may have had to rely on discounts to get shoppers to open their wallets.
In corporate news, the day’s big winners included shares of online coupon company Groupon (GRPN), which reported strong sales late Wednesday; Tesla Motors (TSLA), where increasing production impressed Wall Street; and online travel agency Orbitz (OWW), which reported a jump in earnings.
Orbitz’s strength helped support shares of its larger rival priceline.com (PCLN), which was due to report quarterly profits after the closing bell.
Tomorrow’s economic data consists of a reading on wholesale inventories for June, where a 0.5% rise is anticipated, in comparison to a similar-sized decline in May. A pickup is usually thought to represent an increase in customer demand.
Also on Friday’s agenda are quarterly earnings releases from Berkshire Hathaway (BRK/B) and NRG Energy (NRG). But most of the big corporate names have already reported. - Robert Mitkowski
At the time of this writing, the author did not have a position in any of the companies mentioned.
12:40 PM EDT - The U.S. stock market is putting in a volatile session today. Notably, the large swings in the market this morning may suggest that traders are looking for direction. At just past noon in New York, the Dow Jones Industrial Average is up 21 points; the S&P 500 Index is now ahead six points; and the NASDAQ, which has been moving around quite a bit, is adding on 20 points. Continued strength on the NASDAQ is notable, as the stocks here tend to be those of the faster- growing companies, and this suggests that traders are still feeling somewhat aggressive. A good showing in the small and mid-Cap names is also encouraging for similar reasons. Market breadth is favorable, suggesting some strength to the session. However, advancing stocks are ahead of decliners by a narrow margin on the NYSE. Most of the market sectors are in positive territory, with notable strength in the basic materials group. Gold, silver, and copper are trading higher, too. The suggestion of a better outlook for metals, possibly due to improved demand in China, may be behind the move in the broader sector. There is also a good showing in the technology group. Meanwhile, there is some sluggishness in the healthcare area.
Technically, the S&P 500 Index has slipped for three consecutive sessions, but is now firming up. Still, it may well take a few attempts for the index to make a sustainable move above the widely- watched 1,700 level. This is particularly the case, as equities may well now be trading at somewhat elevated price-to-earnings multiples. For now investors seem to be on board, as the VIX is back below 13, and heading lower.
Meantime, traders got some decent economic news to review this morning. Notably, initial jobless claims for the week ended August 3rd, came in at 333,000. The decline from the prior week’s level, was largely unexpected by analysts, who had been calling for a rise in claims. The weekly continuing claims did not show the same progress. Tomorrow, also will be a light day for news, with just wholesale inventories for June due out.
Finally, traders received a few earnings reports today. Tesla (TSLA) shares are up sharply, after the electric car maker posted better-than-expected quarterly results. But, CenturyLink (CTL) stock is lower, after that company issued weak guidance. - 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 reports continue to flow in, and today’s big winner appears to be Tesla Motors (TSLA). Indeed, the stock is surging ahead of the bell, after the electric vehicle manufacturer delivered better-than-expected June-period results. Other stocks moving higher in pre-market trading on earnings news include cable television network AMC (AMCX) and packaged foods company Mondelez International (MDLZ). It wasn’t all good news, however, and shares of coffee roaster and distributor Green Mountain (GMCR), fresh milk and dairy products producer Dean Foods (DF) and, most notably, storage memory platform developer Fusion-io (FIO) are all indicating lower openings this morning.
Elsewhere, a number of companies have released sales figures for the month of the July. Shares of restaurant operator McDonald’s (MCD – Free McDonald’s Stock Report) and apparel and accessories retailer L Brands (LTD) garnered warm reactions, but investors were disappointed with results from warehouse club Costco (COST). – 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 - Chalk up another one for the bears, those suddenly rejuvenated stock market pessimists, who have been starved of victories thus far this year. True, the setbacks have not been memorable this week, but yesterday's modest losses did make it three days in a row that the major averages had retraced some of their recent historic gains.
In all, the Dow Jones Industrial Average, aided by a modicum of late buying, fell 48 points; the Standard and Poor's 500 shed six points; and the tech-heavy NASDAQ dropped a modest 12 points. Losing issues, once again, outdistanced winners, meantime, with the day's most notable slippage coming in the mid- and small-cap areas of the market. This latter trend suggests that tolerance for risk, a hallmark of the year's bull market, is suddenly less widespread.
Contributing heavily to the mild selloff this week have been fears that the Federal Reserve will begin the much-anticipated tapering of its celebrated bond-buying program as early as next month. Previously, many had assumed the slowdown in this popular program would commence a bit later this year. However, comments on Tuesday by two regional Federal Reserve officials are starting to suggest an earlier tapering introduction. That is a less-than-compelling prospect for the bulls, who are growing a bit more defensive these days as the elevated valuations now in place are making some of them jittery. And, clearly, the stock market is vulnerable at these levels.
As to other influences, there was little of note on the U.S. economic front yesterday, and save for the weekly figures on initial and continuing jobless claims, news will be sparse again today. That also will be the case tomorrow. This all changes next week when we will get a succession of pivotal releases. The economy is now proceeding at a decent pace, and following the surprisingly strong second-quarter showing, in which GDP gained 1.7%, which was well in excess of the roughly 1% rise presumed earlier, the guessing is that the current period, which is approaching the halfway mark, will show growth that is a bit closer to 2%. A further increase then seems likely in the final stanza. Such a scenario would suggest that a September tapering effort by the Fed would not be out of the question, or injurious, for that matter. It has been our sense for some time, in fact, that the lead bank could be over playing its hand, and that a less aggressively expansionary monetary course might be in the nation's best interest over the long term.
Also influencing trading here to some extent has been the latest selloff in Japan's stock market, which tumbled another 4% overnight from Tuesday to Wednesday on fears that a strengthening yen could hamper that nation's fragile economic revival. A less-frenetic market session was then put in during this past overnight period, although, once again, the Nikkei pulled back somewhat. Europe, meanwhile, continues to hold its own, most likely on some encouraging economic data issued earlier this week on the Continent. Better economic news in China, issued overnight, also is helping the markets in Europe.
As to our market over the final two days of this week, the parade of earnings reports is slowing down rather noticeably, with those companies now reporting holding proportionately fewer surprises, and a greater number of negative stories, some of which have led to rather steep individual selloffs in recent days.
This is clearly a skittish market, which could, should the news background deteriorate even a little from here, usher in a period of lower stock prices. Thus far, the bulls have proven highly resilient, but from their present lofty perch, equities are vulnerable. On the whole, we think the year's best gains have been made, but we also aren't calling for a notable retreat, especially given the low level of interest rates. As to the day ahead, the equity futures are pointing to some solid early buying in today's session, following the aforementioned gains in Europe, with the S&P 500 Index futures now up by better than six points and the NASDAQ futures ahead by almost 14 point. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.