After The Close - Stocks spent most of Friday’s session modestly in positive territory, and finished with a bit of a flurry. At the end of session, the Dow Jones Industrial Average closed 47 points higher, back over the 15,000 level and the NASDAQ was 19 points to the good. In terms of market breadth, advancing issues easily topped decliners on the New York Stock Exchange.
The week ended on a quiet note, with yesterday’s uproar over a three-hour suspension of trading on the NASDAQ slowly fading. There were no such glitches today, and the subdued tone seemed to reflect the mood of a late summer day.
What business news there was turned out to be a bit of surprise, in that new-home sales for July fell sharply, rather than remaining at the brisker pace evidenced in June. That seemed to help stocks, given that interest rates fell on the day. Rising bond yields over the past few weeks have proven a serious obstacle for equities.
The weaker-than-expected housing market report may have also given credence to the notion that the Federal Reserve would continue to buy bonds in a big way, or at least not taper its purchases as quickly as it otherwise might.
As for individual stocks, Microsoft (MSFT - Free Microsoft Stock Report) stood out after its CEO, Steve Ballmer, indicated he would be stepping down. Microsoft stock rose on the news, turning in by far the best performance of the Dow Industrials. No major changes may occur at the software giant even after the appointment of a new leader. But there could very well be a narrowing of focus to concentrate on what the company does best.
Oilfield services mainstay Halliburton (HAL) also traded higher on heavy volume after the company said its cash tender offer to buy back $3.3 billion worth of stock was oversubscribed. The company indicated that it would be buying 68 million shares at $48.50. That price which was at the top of the range the company had earlier set.
On the down side, another retailer indicated today that it was not faring as well as hoped. This time it was Aeropostale (ARO), whose shares fell sharply when the company reported weak earnings.
Monday brings a report on July’s durable goods orders before the market opens, where a decline is thought to be on tap. Any significant divergence from what is expected could provide the market with some direction early on. - Robert Mitkowski
At the time of this writing, the author did not have a position in any of the companies mentioned.
12:30 PM EDT - At the start of the trading day, it appeared that the major U.S. indexes would follow through on yesterday’s upward move, fueled by positive news from the latest manufacturing surveys for the U.S., the euro zone, and China. The blue chips, as represented by the Dow Jones Industrial Average, got off to a positive start, with particular help coming from shares of Microsoft (MSFT - Free Microsoft Stock Report), which zipped ahead when it was announced that the company’s current CEO, Steve Ballmer, would be stepping down in 12 months. The stock was up as much as 8.7% above the prior-day’s close early in the session (following a gain of two-and-a-half percentage points on Thursday), but even this was not enough to keep the Dow in the black for long.
However, in what may be deemed as yet another example of bad news is good news, the index did a swift turnaround leading up to the release of a disappointing report on the housing market from the Commerce Department. Specifically, sales of new homes showed a 13.4% sequential decline in July, to an annual rate of 394,000 units. It should also be noted that the June sales pace of 455,000 homes was down markedly from the initial reading of 497,000 units. Higher mortgage rates will take the brunt of the blame for the deceleration, but July’s new home sales were still up a respectable 7% from the year-ago tally. Traders apparently took this slowing pace as positive news, in that it may cause the Fed to think twice about easing back on the monetary stimulus pedal, a strategy that has played no small part in supporting the current bull market.
As it stands at the noon hour, the Dow is hanging on to a modest gain. The broader S&P 500, largely moving in lock step, is also ahead fractionally. The NASDAQ, meanwhile, has also traced out a similar pattern, though it has managed to stay in the green throughout the session so far, with a quarter-percent gain at mid-day. It would seem that any concerns over Thursday’s three-hour technical lapse over at the NASDAQ have blown over, at least for now.
Over across the Atlantic, the European bourses have at least behaved with more conviction as far as price movement. Driving the markets higher there was news that the United Kingdom’s second-quarter revised GDP growth number of 0.7% came in higher than expected (the initial reading, and consensus, had been for a 0.6% gain). Meanwhile, not to be outdone, Germany announced that it too had seen its economy expand at a 0.7% rate, its best quarterly showing in over a year. Thus, after an initial dip, traders sent the major exchanges higher. London’s FTSE 100 led the group with an advance of about half a percentage point, while Germany’s DAX and France’s CAC-40 were up around the quarter-percent mark each.
From here on, a good part of the market’s time between economic reports will likely be devoted to speculating on just when, and by how much, the Federal Reserve will back off from its bond-buying campaign. Our sense is that it will be a gradual process, as the lead bank will need to see further signs of stability before easing up on the monetary accelerator. And the brake pedal probably won’t fully come into play until well into 2014. -Mario Ferro
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 – Investors are going over a new batch of July-period financials, and a few of the earnings reports put out last night and this morning left them wanting more. Indeed, shares of Internet radio operator Pandora Media (P), apparel and accessories retailers The Gap (GPS) and Aeropostale (ARO), and telecommunications equipment company Marvell Technologies (MRVL) are all indicating lower openings this morning, with ARO showing the most weakness. It was not all bad news, however, and the stocks of Autodesk (ADSK), a leading design-software and digital-content provider, and retailers Foot Locker (FL) and Ross Stores (ROST) are all up 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 stock market, which came unglued late Wednesday afternoon amid confusion about what the Federal Reserve was planning to do as far as future bond-buying was concerned, pulled itself back together yesterday, posting a healthy comeback on the strength of better economic metrics at home and abroad.
However, the day, which featured gains in all three major indexes (the Dow Jones Industrial Average, the Standard and Poor's 500 Index, and the NASDAQ) for the first time in a week, was anything but routine, as trading was halted for several hours on the NASDAQ, the second-largest U.S. stock exchange, due to technical problems. Trading finally commenced late in the session, and did so by strengthening into the close.
Overall, and notwithstanding the trading glitch on the NASDAQ, it was a good day for the bulls, as better economic data overseas-- notably a strengthening purchasing manager's survey on manufacturing in China--got the ball rolling towards a higher session at the outset of trading on our shores. And over here, we saw upbeat data on the leading indicators, which jumped by 0.6% in July, after an unchanged reading in June. Also, jobless claims, while rising modestly in the latest seven-day stretch, remained near a six-year low. Armed with these reassuring metrics, and perhaps less-chagrined by the Fed's purposeful indecisiveness and accompanying vague approach than on Wednesday, the market did an about face and headed higher from the outset. And though the gains were not dramatic, they did slowly build through much of the day, so that by the close, the averages were all fairly near their respective highs for the session.
All told, the Dow added 66 points, to climb back to within 40 points of 15,000; the Standard and Poor's 500 Index rose 14 points; and the NASDAQ, after regaining its technical footing, jumped 39 points, once again outperforming the other two indexes. The small- and mid-cap indexes, specifically the S&P Mid-Cap 400 and the small-cap Russell 2000, also did proportionately better than the Dow-30, which despite its solid showing yesterday, has recently been a relative underperformer, after a stellar first half.
As to individual stocks, the latest session saw a notable decline in the shares of computer behemoth Hewlett-Packard (HPQ – Free H-P Stock Report) with that issue coming under pressure from the issuance of a listless quarterly sales and earnings report. Hewlett-Packard shares fell more than 12%, in response, limiting the Dow's gain on the day to less than half a percent. Still, this stock remains the blue chip index's best performer thus far in 2013. Microsoft (MSFT – Free Microsoft Stock Report) shares, meanwhile, had a good day, with that blue chip rising two-and-a-half percentage points. Elsewhere, it was another mixed session for the retailers, as that group continues to issue its sales and earnings results, which generally are for the three months ending in late July.
Taking all of this in, the stock market is nervous and under some pressure, being caught between relief that the economic up cycle is proceeding at a modestly healthier clip than several months ago, but also concerned that such better trends could invite the Fed to start to taper its highly popular bond-buying activities sooner rather than later. As for the aforementioned earlier softness, given the market's formidable 2013 run, the recent bout of profit taking has probably been constructive.
Now, a new day dawns, and the markets around the world are mixed. To wit, in Europe, the London FTSE 100 was recently up a tad, while the Frankfurt DAX was just about unchanged, and the Paris CAC-40 was off modestly. And on our shores, the equity futures are up slightly, reversing an earlier limited selloff, suggesting a possible initial bounce higher to the trading day. It should be noted that bond yields continue to climb, with the benchmark 10-year Treasury note now yielding 2.91%, on a small rise thus far this morning.
Finally, the housing market is in the news today, as the U.S. Commerce Department will release data on sales of new homes for July; a small month-to-month downtick is the expectation at that time. On a year-over-year basis, though, that metric is expected to be up notably, as has been the long-standing pattern in this recovering industry. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.