After The Close - Wall Street headed back into the doldrums today as investors found little to get enthusiastic about. At the end of the day, the Dow Jones Industrial Average and the NASDAQ had given back 73 points and nine points, respectively. It could have been worse. At one point, the Dow was off over 150 points, but bargain hunters apparently saw some value, and stepped in, when the major averages were at their worst levels of the session. As for the broader market, decliners narrowly outpaced advancing issues on the Big Board; losers topped gainers by a wider margin on the NASDAQ.
There was little business news in the United States today, and what there was turned out to be unimpressive, as wholesale inventories for June fell a bit, rather than rising, as had been expected. It was the third month in a row that inventories dropped. The silver lining is that stockpiles will need to be replenished at some point, hinting at better economic growth going forward.
Overseas, a report out of China showing industrial output jumped sparked a rally in stocks of basic materials companies. That sector was the clear winner today. Shares of miners Rio Tinto (RIO), Peabody Energy (BTU), and Arch Coal (ACI) all turned in nice percentage gains, as did shares of steelmakers U.S. Steel (X) and Nucor (NUE).
In corporate news, investors cheered results from online travel agency priceline.com (PCLN), sending its shares catapulting toward the rare $1,000-a-share mark. But it was the stock of Cvent (CVT), which set its IPO pricing last night, that really stole the show. Shares of the event planning and management company rose more than 50%.
Largely, though, trading had the feel of a lazy summer day. The economic news out of China provided a sense that its economy may have bottomed out, which would be a plus. But over here, there is a feeling that interest rates are starting a long climb from their historic lows. True, mortgage money is still cheap, and that is a plus for the housing market recovery. But refinancings are already drying up, and further moves higher in rates could slow housing’s comeback.
Another drawback is that gasoline prices are still on the high side, averaging $3.58 a gallon nationwide, according to AAA. That is a bit less than the $3.66 a gallon of a year earlier, but not much.
Overall, the bulls will need the weekend to regroup, after stocks’ first down week in over a month. - Robert Mitkowski
At the time of this writing, the author did not have a position in any of the companies mentioned.
12:20 PM EDT - The final day of a trading week is looking like another productive session for the bears. Indeed, after a listless start, the major equity indexes have turned notably weaker as we pass the midday hour on the East Coast. The Dow Jones Industrials, with every stock other than Alcoa (AA - Free Alcoa Stock Report) toiling in the red, is down triple digits, while the broader S&P 500 Index and the NASDAQ—which at one point this morning was in positive territory—are now holding losses. Overall, the spread between declining and advancing issues, which was razor thin for most of the morning, has widened considerably in favor of the former on both the New York Stock Exchange and the NASDAQ. Investors should note that this is not atypical of summer Fridays, where lighter trading volume can raise the market’s volatility and that certainly appeared to be the case in the last hour.
From a sector perspective, nearly all of the 10 major sectors are now in negative territory. The biggest laggards are the consumer staples, industrial, and utilities issues. There is also some sector rotation taking place today. In particular, the materials sector, which has been out of favor for much of this year, is showing some mild buying interest. Within the basic materials space, shares of the aluminum makers and steel producers are garnering some interest. A report overnight showing that industrial production increased 9.7% year over year last month in China is giving the basic materials issues a nice boost. Conversely, as noted, the consumer staples and utilities groups are among the weaker performers thus far. Our sense is that concerns that a slowdown in bond purchases by the Federal Reserve may begin as early as next month—yesterday a third Federal Reserve official this week suggested such—is causing some rotation out of the these two higher-yielding sectors. The appeal of higher-yielding stocks could be compromised if rates on fixed-income securities were to move materially higher in the coming months. Thus far today, the yield on the 10-year Treasury note is relatively unchanged at 2.60%.
As noted, there were not many headline grabbers on both the economic beat this morning. However, we did learn that June wholesale inventories fell 0.2%; the consensus expectation called for a 0.4% advance. The economic news, though, will heat up next week, with notable reports due on retail sales, industrial production, and housing starts. On the international front, as noted, China saw a jump in its industrial production, but France, the euro zone’s second-largest economy, reported that industrial production fell 1.4% month over month.
Meantime, the earnings reports continue to roll in as the second-quarter reporting season is winding down. Today’s earnings news could be termed mixed. On the bright side were reports from priceline.com (PCLN), film studio Lions Gate Entertainment (LGF), and IT services provider Rackspace Hosting (RAX). Conversely, investors were disappointed with what they heard from semiconductor company NVIDIA (NVDA), beverage maker Monster (MNST), biotech company Dendreon (DNDN), and electronic health record provider Allscripts HealthcareSolutions (MDRX). Still, the results from none of these companies would be considered headline grabbers and thus the impact on the performance of a sector would likely be minimal.
Looking ahead to the second half of the trading day, we think it would take a big effort on the part of the bulls to knock the bears out of the driver’s seat in a market that for most of this week has seen a modest amount of profit taking. The Dow 30, the S&P 500 Index, and even the NASDAQ, which has performed the best of the major indexes over the last fortnight, appear to be headed toward a losing week. 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 flow in, though not at the breakneck speed seen in recent days. Investors appear pleased with quarterly results from online travel site Priceline.com (PCLN), film studio Lions Gate Entertainment (LGF), and IT services provider Rackspace Hosting (RAX), and these stocks are trading higher in the premarket as a result. Conversely, shares of semiconductor company NVIDIA (NVDA), beverage maker Monster (MNST), biotech company Dendreon (DNDN), and electronic health record provider Allscripts Healthcare Solutions (MDRX) are all indicating lower openings on earnings news.
Elsewhere, shares of BlackBerry (BBRY) are up nicely ahead of the bell, after reports surfaced that the struggling smartphone maker may be more interested in going private, possibly to work on its turnaround efforts out of the public eye. – 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 suddenly rejuvenated bears had their modest three-day winning streak come to an end yesterday, but it wasn't necessarily easy for the victorious bulls. To wit, after a report of stronger economic activity in China was released very early in the day, and stocks in Europe responded well, our futures moved into high gear. And when a report of lower initial jobless claims was issued about an hour before trading commenced on our shores, the table was set for a strong opening at 9:30 (EDT).
But, shortly after that compelling start to the session, and a consequent decent double-digit early gain in the Dow Jones Industrial Average, stocks quickly faltered. The selloff was strong enough, in fact, to cause the aforementioned blue chip index to lose all of its early gains and then some to fall some 40 points into the red.
However, stocks didn't stay at those lower levels for long, and soon the buyers, starved of a market rally this week, were back in in business, pushing the leading averages back into the black once again. The market then proceeded to hold above the neutral line all day, with more notable strength in the NASDAQ than in the Dow, as has been the pattern over the past fortnight, or so. The best performances, though, were reserved for the small- and mid-cap names, which is notable, as its suggests a spirit of aggressiveness is once more in vogue.
Leading the way higher on a sector basis, were the precious metals, fertilizer, and basic materials stocks. It seems as though these recently beleaguered groups often rally on any hint of good news on China's economic front, as the world's second largest economy has an outsized effect on such businesses, given the competitive nature of the heavy industrial categories. China, for example, is already the dominant player in many of these markets--most notably steel.
There were, in fact, some big wins yesterday among some individual stocks within these groups--most notably in Newmont Mining (NEM), Mosaic (MOS), and Cliffs Natural Resources (CLF). Overall, meantime, there was a nice plurality of winning stocks over losing issues on the day, but not the overwhelming margin we have seen in past string market sessions, suggesting that there could well be more profit taking ahead should the economy, the global scene, or the Federal Reserve hold some nasty surprises.
Meanwhile, looking ahead, second-quarter earnings reporting season is nearly at an end, although the retailers, which are mostly on a July-ending quarter, will be coming out with their metrics momentarily. Also, after the economy largely took a pause this week, activity will heat up again in the upcoming five-day stretch. Then, of course, there is the Fed, which could well start to slow down its popular bond-buying program as early as next month. Finally, in regard to the Fed, the presumptive choice to succeed the current Fed Chairman, Ben S. Bernanke, is likely to be announced within weeks, and as we draw closer to that date, the drama surrounding that succession will logically heat up.
Finally, as new day is now at hand, and following yesterday's modest win for the bulls, and notwithstanding data showing that industrial output rose more strongly in China than expected, our equity futures are pointing downward with less than an hour to go before the start of the new trading day. Comments by another Fed official, Richard Fisher, the President of the Federal Reserve Bank of Dallas that the lead bank would likely begin cutting back on its massive bond-buying stimulus as early as next month should the economic trends remain positive are apparently again rattling the markets. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.