After The Close - Stocks today backed off of the record highs set after yesterday’s electrifying late-afternoon run. At the close, the Dow Jones Industrial Average was off 40 points, although the NASDAQ edged six points higher. Market breadth was decidedly negative, though, with about three issues declining for every two advancing on the New York Stock Exchange.
In some respects, the investment community is still getting used to the idea that the Federal Reserve is not yet starting to taper its massive bond-buying program, as most of Wall Street had expected.
But it is quite possible that the Fed is only delaying the inevitable, and wants to keep providing a large amount of stimulus to the economy while the politicians in Washington engage in what are shaping up to be bruising battles over the budget, raising the debt ceiling, and implementation of the Affordable Care Act.
As far as the economy goes, recent job creation has been uninspiring, which very likely contributed to the Fed’s decision to keep adding Treasury securities and mortgage holdings to its balance sheet. However, this morning’s economic data either met expectations or came in stronger than projected. That caused prices on government bonds to fall a bit, and yields (which move in the opposite direction) to rise.
As for the stock market’s various sectors, there was clearly some reshuffling today. Financial stocks took it on the chin, for example, after having had a nice run of late on the thinking that banks would benefit from higher yields on their assets and insurers would be able to invest in higher-coupon bonds, as interest rates rose. But the Fed’s decision to stand pat regarding its bond purchases was taken to mean that interest rates won’t rise as quickly as previously thought. That hurt the shares of lenders, such as Regions Financial (RF), and insurers, including MetLife (MET) and Prudential Financial (PRU).
One big winner in the recent session was gold prices, which moved up about $60 an ounce, to around $1,370, although that didn’t translate into gains for shares of gold miners.
Among individual stocks, Rite-Aid (RAD) was the star of the day. The drug store chain posted profits in its latest quarter, when a loss was expected.
Meantime, shares of Tesla Motors (TSLA) hit an all-time high following an analyst upgrade.
Tomorrow, there is no major business news on tap, although investor focus is due to soon shift to prospects for third-quarter corporate profits. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:30 PM EDT - The U.S. stock market is taking a pause today, as traders digest yesterday’s Fed-inspired rally. At past noon in New York, the Dow Jones Industrial Average is off 24 points; the broader S&P 500 Index is down just one point; but the NASDAQ, which has been displaying leadership for some time, is up five points. Market breadth suggests a mixed tone to today’s session, as advancers are about even with decliners on the NYSE. Further, the market sectors are also largely divided. Strength can be seen in the industrials and the technology stocks. In contrast, there is some weakness in the financial issues. The basic materials stocks and the healthcare names are also trading lower.
Technically, the S&P 500 Index has not only recovered from the August pullback, but has made its way into new high ground. It is hard to argue with this display, as clearly the bulls are in control. It should be noted that bargain hunters and the bulls have moved in to support stocks on numerous occasions, and the market has rallied with no major corrections for some time now. Some may be forecasting continuing economic expansion both here and abroad. Further, central banks across the world seem determined to keep interest rates low and stimulus measure in place, which is a plus for stocks.
Meanwhile, traders are largely looking past some decent economic news today. The employment situation continues to improve, as the initial jobless claims came in at 309,000 for the week ended September 14th. Weekly continuing claims also headed in the right direction, which is good to see. Meanwhile, the housing market is showing signs of strength as existing home sales came in at 5.48 million units in August, which was better than last month’s figure and higher than analysts had expected. Elsewhere, investors also got a good report from the Philadelphia Fed about the economy in that region.
In the corporate news, Rite Aid (RAD) shares are trading higher, after the drug store operator put out strong profits and issued an encouraging outlook. In retail, Pier 1 Imports (PIR) stock is down on a weaker-than-expected report. In technology, Oracle (ORCL) stock is weak, as investors are concerned about its outlook. Notably, with stocks trading at elevated price-to-earnings multiples, it will be important for companies to meet or exceed guidance. In this sense, the upcoming third-quarter earnings season will be crucial. No doubt, missteps will not be well received. -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 – A number of stocks are likely to see active trading today, including Agilent Technologies (A). Indeed, the equity is up sharply ahead of the bell, on news that the provider of instrumentation solutions plans to split into two separate publicly traded companies, one housing life sciences, diagnostics, and applied markets (LDA)and the other comprised of electronic measurement (EM) products. The stock of BioMarin Pharmaceutical (BMRN) is also indicating a higher opening this morning, likely due to speculation that drugmaker Roche may be interested in acquiring the biotech company.
Elsewhere, shares of software developer Oracle (ORCL) and home goods retailer Pier 1 Imports (PIR) are moving lower in pre-market trading on earnings news, with PIR stock showing the most weakness. On the other hand, investors were pleased with August-period results from Rite Aid (RAD), as well as the drugstore operator’s outlook, and the issue is up sharply ahead of the bell, as a result. – 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 Federal Reserve did the unexpected yesterday, albeit it wasn't a major surprise, and the stock market, which had been working its way lower for the better part of the latest session, did an about face, and closed strongly higher.
What exactly did the Fed do to unleash the bulls yet one more time? Specifically, the lead bank's Federal Open Market Committee (FOMC), which had been expected by many economic pundits to begin paring its $85 billion-a-month bond-buying program, instead announced, in an accompanying statement after the meeting's conclusion, that it was staying the course for now.
True, the central bank did acknowledge that the economy was moving forward at a moderate pace and that labor market conditions, a major concern of the Fed, were improving. The FOMC also acknowledged that its bond buying has been helping to shore up the now-maturing expansion.
So why did the Committee choose not to act at this time? Well, it did indicate that it was still fearing deflation, noting that inflation persistently below 2%, as it is now, could pose risks to economic performance. Also, while lauding the success of the bond buying, it also suggested that it wanted to ''await more evidence that progress will be sustained before adjusting the pace of its purchases. The FOMC did not suggest that its original timetable of later this year for the start of tapering was shifting, only that it was not yet ready to take such a course. The vote on the Committee was nearly unanimous, with just one dissenting vote, that being Esther L. George.
Armed with this ongoing accommodation, the stock market did an abrupt about face just after 2:00 PM (EDT), turning what had been a near 50-point decline in the Dow just before that hour to a sudden move by that composite to an increase of some 180 points, a swing of approximately 250 points on a trough-to-peak basis, before closing with a gain of 147 points on the day. The NASDAQ, meanwhile, surged 38 points, while the Standard and Poor's 500 Index jumped 21 points. Both the Dow and the S&P 500 Index reached all-time highs in the process. The NASDAQ, however, while at a 52-week peak, remains some 1,500 points below its record high above 5,000 established during the dot.com mania of 2000.
All told, it was a memorable showing, as the central bank chose to wait for another day to do the inevitable, namely to start winding down its aggressive and unprecedented monetary accommodation. Although the Fed's decision could suggest that all is not well with the economy just yet, especially on the jobs front, investors were choosing to focus on the surprise action rather than consider what this all might mean.
As to other influences on trading yesterday, the Commerce Department did report that housing starts had increased just nominally in August and below expectations, while building permits, a more forward-looking metric, had fallen modestly. However, that report did not spark much reaction on Wall Street, as investors were, instead, focused solely on the Fed. This morning, meantime, at 10:00 (EDT), the National Association of Realtors will report on sales of existing homes. A modest retracement of the recent gains is expected.
Now a new day dawns, and what a day it is shaping up to be thus far, with solid gains across Asia overnight and now in Europe this morning. In fact, Germany's DAX has surged to an all-time high thus far in trading on that country. Overall, the Continent is seeing average increases of better than 1%. And on our shores, the Standard and Poor's 500 Index futures are up by better than three points, while the NASDAQ futures are pressing higher by about seven points, presaging a nicely higher start to the trading day when activity commences in about an hour from now. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.