After The Close - Stocks were under heavy pressure from the opening bell today, and finished not far from their session lows. At the end of the day, the Dow Jones Industrial Average closed down 225 points and the NASDAQ was 63 points lower, or comparatively weaker than the Dow. Declining issues swamped gainers on both the Dow and the NASDAQ.
A steep, selloff such as the one that occurred today, is not unusual after a major run-up in stock prices, as has taken place over much of 2013. One of the catalysts, in this case, was doubts about the strength of consumer spending which, in turn, drives the economy. Disappointing signs from Macy’s (M) yesterday and Dow-component Wal-Mart (WMT - Free Wal-Mart Stock Report) today undermined the feeling that the consumer is in recovery mode.
Another downer today was the cautious outlook put forth by Cisco Systems (CSCO - Free Cisco Stock Report), another member of the Dow. Cisco’s plans to lay off 4,000 workers are being taken by some as a bad sign about the tech sector in general.
A third worry that has bothered investors in recent weeks is the sentiment that the Federal Reserve may soon pull back on its massive stimulus. The added liquidity provided by the Fed is seen as having provided stocks with a big lift in recent months. Jitters about the Fed’s next move have contributed to higher long-term interest rates, as well. The yield on the 10-year Treasury briefly topped 2.8% today, much higher than just a couple of months earlier, before pulling back a bit. Higher interest rates usually make it tougher for stocks to advance.
It wasn’t all gloom and doom today, though. A couple of retail stocks, Kohl’s (KSS) and Dillard’s (DDS) moved nicely higher on favorable earnings reports, suggesting there are at least pockets of strength on the on the retail landscape.
Gold stocks, such as Newmont Mining (NEM) reverted to form, as well, providing a refuge on a day when most strategies weren’t working, as gold prices continued to recover from recent weakness.
There was one merger of note, too, with Maxim Integrated Products (MXIM) buying Volterra Semiconductor (VLTR). Volterra’s shares jumped on the news.
Tomorrow brings a fresh batch of economic data for investors to consider, including information on housing starts and building permits, where positive comparisons are expected. Reports due out on productivity and consumer sentiment are also projected to show favorable trends. Some good news could provide support for stocks, which have been notably weak for a couple of sessions now. - Robert Mitkowski
At the time of this writing, the author did not have a position in any of the companies mentioned.
12:00 PM EST - The U.S. stock market opened sharply lower this morning, and so far has been able to mount only a modest recovery. At just past noon in New York, the Dow Jones Industrial Average is off 176 points; the S&P 500 Index is down 19 points; and the NASDAQ, which is leading the market lower, is surrendering 47 points. Market breadth is decidedly negative, as declining stocks are outweighing advancers by roughly 6 to 1 on the NYSE. Notably, there is particular weakness in the S&P Mid-Cap Index, further confirming the widespread selling that we are seeing today.
The market sectors are all in negative territory. There are sharp losses in the technology names, with pronounced weakness in the semiconductor stocks. The financial issues are also trading lower. While there is no real strength in the market, the energy sector is holding up a bit better than many other industry groups. Also, the utilities are not down too sharply, which is to be expected, as these high-yielding defensive issues tend to find support in times of turbulence.
Technically, today’s move lower has driven the S&P 500 Index below the trading range that it had been locked in for several sessions. The index is now testing its 50-day moving average, located at about 1,655. We will have to now see if the market can find support at this key level, as it has in the past, or if a deeper correction will unfold. It will be interesting to see if the bulls can move in this afternoon, as they have in some recent sessions. For now, traders are definitely feeling more apprehensive, as the VIX is higher to near 14.
Today’s selloff may have gotten its start overseas. In Asia, Japan’s Nikkei headed lower overnight, on reports that lower corporate tax rates may not be forthcoming. In Europe, the bourses also put in a weak session.
Meanwhile, back on our shores traders received a few discouraging corporate reports. Technology giant, Cisco (CSCO - Free Cisco Stock Report) put out disappointing guidance, and that issue is trading notably lower. Also, Wal-Mart (WMT - Free Wal-Mart Stock Report) stock is off, also on a weaker-than-expected outlook.
Elsewhere, traders largely overlooked a few decent economic reports released this morning. Specifically, the weekly initial jobless claims declined, further reinforcing the idea that the employment situation is on the mend. Also, consumer prices for July came in largely as expected. It is possible, that the improving jobs figures have some traders concerned that the Fed might be more inclined to taper its bond-buying program sooner rather than later. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
10:00 AM EST - The U.S. stock market opened sharply lower this morning, and remains weak. At roughly 10:00 AM in New York, the Dow Jones Industrial Average is off 199 points; the broader S&P 500 Index is down 22 points; and the tech-heavy NASDAQ is shedding 57 points. Market breadth is extremely negative, with decliners well ahead of advancers. This suggests broad-based selling, which may well continue into the afternoon. Weakness in the markets overseas, as well as some disappointing corporate news here at home, is likely the cause of the selloff. – 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 – Second-quarter earnings season is largely in the books, but more reports continue to trickle in, especially from retailers, many of which have fiscal years that end in January. To wit, Wal-Mart Stores (WMT - Free Wal-Mart Stores Stock Report), the world’s largest retailer, has announced July-period results that were roughly in line with expectations, but its outlook left investors wanting more, and the stock is trading moderately lower in the premarket as a result. Other retailers’ quarterly financials garnered warmer receptions on Wall Street, however, and shares of Kohl’s (KSS) and Dillard’s (DDS) are moving higher ahead of the bell as a result. Other stocks indicating higher openings this morning on earnings news include cosmetics maker and marketer Estee Lauder (EL), precision instruments company Agilent Technologies (A), and small engine manufacturer Briggs & Stratton (BGG).
On the other hand, the stock of Cisco Systems (CSCO - Free Cisco Stock Report) is down sharply in the premarket, after the networking equipment bellwether delivered decent July-quarter results, but offered a disappointing outlook and announced plans to cut its workforce by 5%, or approximately 4,000 people. Shares of data storage company NetApp (NTAP) and drugmaker Perrigo (PRGO) are also trending lower ahead of the bell on earnings news. – 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 long dog days of August continue to ramble on down on Wall Street, with the recent lackluster trading and market movements remaining in force thus far this week. Thus, after a pair of unexceptional trading days to start the week, worries about earnings and a possible near-term tapering of the lead bank's popular bond-buying program once more rattled the bulls, only this time a bit more decisively than on Monday or Tuesday.
Specifically, after the aforementioned pedestrian performances on the initial two sessions of the week, the sellers were a little more prominent yesterday. Of note, the market started out the session lower and never was able to mount an offensive. In all, after falling by as much as 135 points on an intra-day basis, the 30-stock Dow Jones Industrial Average remained in triple-digit loss territory for much of the day, finally ending the session off 113 points. Things were a little better for the two other major large-cap indexes, but the Standard and Poor's 500 Index still ended down nine points, while the NASDAQ gave back 15 points. The small- and mid-cap indexes also gave ground, with the S&P Mid-Cap 400 dropping eight points, or nearly two-thirds of a percentage point. Losing stocks also held service against winning issues on the Big Board.
On this day of softer market action, there was little of note on the economic front to alter the tone of trading, with just a flat reading in July producer prices being issued. But in other news, giant retailer Macy's (M) disappointed investors with its quarterly results, and that stock fell almost 5%. And in Federal Reserve news, more intonations were voiced regarding a possible imminent tapering of the lead bank's popular bond-buying program by as early as next month. It should be noted that whether such a move takes place in September, or later this year, it is no longer a question of whether the Fed will act, but when it will choose to slow things down. In response, bond yields continue to climb, with the 10-year Treasury note now up to a yield of 2.71% at yesterday's close and with the return on the companion 30-year Treasury bond now up to a yield of 3.75%.
Meanwhile, in news that hit after the closing bell on Wall Street, networking giant and Dow-30 component Cisco Systems (CSCO - Free Cisco Stock Report) reported that its quarterly earnings had beaten expectations, but just nominally, while revenues had come in just at consensus targets. But the Street was not overly impressed with that showing, and the stock, which eased in after-hours trading, is suggesting a lower opening today. Also, of note, Wal-Mart Stores (WMT - Free Wal-Mart Stock Report) has reported its quarterly metrics this morning, and those results were disappointing. Not surprisingly, that issue is likewise pushing lower in pre-market dealings. In general, though, second-quarter reporting season is now largely in the books, and, for the most part, the results were reasonable, but not especially welcoming.
As to other news, the government has released its follow-up report on inflation this morning, with data showing that consumer prices had ticked up modestly last month. Then, in a few minutes from now, the Commerce Department will provide reports on industrial production and factory usage. Tomorrow, we are due to get news on housing starts and building permits.
Finally, there are the markets overseas to note, with reports out of Asia denoting a generally lower market performance overnight, while in Europe, the principal bourses are lower and near their worst levels of the session. And on our shores, the poor reception for the releases from Cisco and Wal-Mart are pushing the futures notably lower, with the S&P 500 futures off nearly 11 points and the NASDAQ futures lower by more than 22 points. The market, it would seem, is now largely being influenced by concerns about pending Fed action, and the resilience shown thus far this year, may be starting to wear thin, in part, we sense, because valuations are now rather stretched. Also, there are the aforementioned bond yields, which are again climbing this morning, with the 10-year note now up to a yield of 2.76%.
At the time of this article's writing, the author had positions in CSCO.