After The Close - Today’s trading on Wall Street offered shades of yesteryear with the much-ballyhooed IPO of Twitter (TWTR) taking center stage. It was in the late-1990s that newly minted stocks of Internet startups were the rage among investors. Much like Twitter, many of those companies were not yet profitable, but only served up the promise of future earnings.
Although Twitter stock performed like a champ in the session that just ended, that wasn’t enough to lift the broader market. At the close, the Dow Jones Industrial Average was off 153 points and the NASDAQ was in the red by 75 points, or a much greater percentage than the Dow. Declining issues topped advancers by more than three to one on the New York Stock Exchange, pointing to the widespread weakness.
True enough, the market was ripe for some profit-taking. The Dow and the NASDAQ were up 20% and 30% for the year prior to today’s opening bell. That sort of performance is beyond the expectations of most traders, and valuation has become an issue. It is only normal to expect periodic pullbacks under those circumstances, as investors cash in some winning positions.
Moreover, there may be a measure of concern that today’s surprisingly strong initial third-quarter GDP report could presage a better-than-expected government nonfarm payrolls report tomorrow. The expectation is that only around 120,000 jobs were added in the month of October. Such a tepid showing would very likely hold in place the belief that the Federal Reserve will keep its massive monetary stimulus program going. But if it turns out that the employment rolls filled out notably more, the view that the Fed will continue to go all out to support the economy could well shift.
Aside from Twitter, stocks bucking the selling wave included insurance underwriter Prudential (PRU) and contract driller Transocean (RIG). Both of those companies provided good profit news and reasons to be optimistic about the future. Not so fortunate were the shares of Checkpoint Systems (CKP), which fell sharply after the security systems company served up a weak outlook.
Before trading begins tomorrow morning, the closely watched monthly jobs report data will be made public at 8:30 a.m. EST. Whether or not the number conforms to Wall Street’s view may have an effect on sentiment early on Friday. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
3:00 PM EST - The stock market, so resilient for so long, is finally starting to succumb to a little profit taking. There is no panic selling today, to be sure, but the leading equity averages, after an unprepossessing start, have started to fall sharply as the afternoon wears on.
Of note, the blue-chip Dow Jones Industrial Average, albeit off in triple-digit territory, is still down a comparatively modest 115 points in mid-afternoon trading. That loss is superseded to a degree by a 19-point drop in the Standard and Poor's 500 Index. However, the big loser among the major large-cap indexes is the NASDAQ, which is off 63 points, or 1.6%. The small- and mid-cap indexes, in the meantime, are off about a percentage point and a half, while losing stocks are ahead of gainers on the Big Board and the NASDAQ to the tune of about three-to-one.
Importantly, all of the 10 market sectors are lower, with seven of them off by more than a percentage point. Thus, notwithstanding some strength by a few Dow components, which is limiting that composite's pullback, the market is off sharply and broadly.
What is behind this rare steep selloff? Well, some pundits blame the good news, specifically the report of a better-than-expected 2.8% increase in third-quarter GDP as suggesting that the Fed might sooner rather than later take its foot off of the monetary accelerator. However, as part of that gain was caused by inventory restocking, which can frequently be reversed in the next quarter, that is hard to accept as a reason for the selling. Perhaps, it is just profit taking in an overbought stock market. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
12:30 PM EST - The U.S. stock market has traded lower into the midday, but is off its session lows. It remains to be seen if the bulls will move in and buy stocks on weakness in the afternoon, as they have on so many occasions in the past, or if some fatigue and selling is starting to set in. Notably, stocks certainly have come a long way in a short period of time. Price-to-earnings multiples are elevated, and appreciation potential, in many cases, is quite low. Further, with the earnings season now ending, it is not clear what will act as the next catalyst that will push stocks higher.
As we pass noon in New York, the Dow Jones Industrial Average, which hit a record high yesterday, is off 20 points; the broader S&P 500 Index is down seven points; but the technology-heavy NASDAQ is quite weak, shedding 37 points, or almost 1%. Market breadth is sharply negative, as declining stocks are outnumbering advancers by about two to one on the NYSE and on the NASDAQ. Weakness is apparent in all of the various market sectors. There are large losses in the technology area, and many of the consumer non-cyclical names are trading lower. While there is little strength in the market today, the high-yielding utilities are showing some relative outperformance. These issues tend to be defensive and may see some renewed interest, if investors become risk averse.
Technically, the S&P 500 Index continues to move sideways, as traders digest recent gains. So far, the sentiment has remained upbeat and we have seen little panic selling on days when the market has declined. However, the VIX is up 3% to 13.09 today.
Meantime, traders shrugged off some decent economic news today. On point, initial jobless claims for the week ended November 2nd, came in at 336,000, which was largely as expected, and a bit lower than the prior week’s upwardly revised reading. Further, according to the initial estimate, GDP expanded 2.8% in the third quarter. This reading was a bit better than many had expected. Meanwhile, tomorrow brings the October employment report, and that may have some traders sitting on the sidelines today.
There were a few discouraging earnings reports released today. Among the larger names, Whole Foods Market (WFM) stock is off after that company posted a mixed report and issued weak guidance. In addition, Qualcomm (QCOM) shares are off sharply on a weak report. Elsewhere, the Twitter IPO (TWTR) was launched this morning, and that new issue is up a dramatic 75% so far today. - 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 – Despite all the buzz about Twitter’s IPO this morning, investors still have their hands full with earnings season, as quarterly reports continue to flow in. Several companies appeared to severely disappoint Wall Street, most notably grocer Whole Foods Market (WFM) and restaurant operator Wendy’s (WEN). Earnings at both companies were solid, but their revenues and outlooks were lackluster, and the two equities are trading down sharply in the premarket as a result. Other stocks indicating lower openings this morning on earnings news include packaged foods company Mondelez International (MDLZ), video game publisher Activision Blizzard (ATVI), and telecommunications equipment developer Qualcomm (QCOM). On the bright side, investors seemed pleased with quarterly results from dairy manufacturer WhiteWave Foods (WWAV) and homebuilder Beazer (BZH), and those stocks are up modestly ahead of the bell as a result.
Retailers are also in the spotlight today, as several have reported same-store sales figures for the month of October. Teen apparel and accessories retailer American Eagle Outfitters (AEO) was the big winner, as it increased its October-period guidance, followed by department store operator J.C. Penney (JCP), which delivered its first positive monthly comp in nearly two years. – 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 has woven an interesting path so far this week. On Monday, it left the gate haltingly before firming up at the close to post modest aggregate gains on the day. Then, on Tuesday, in a classic Monday-Tuesday reversal, the market left the starting gate on a down note, fell notably in the first hour of trading, and then began a half-hearted move to pare its losses, before ending the day modestly to the downside. Then yesterday the market, buoyed by continued constructive earnings data and supportive economic metrics, left the gate quickly, and before long the Dow Jones Industrial Average had jumped to an all-time intraday high of 15,750. The Standard and Poor's 500 Index, a more frequent name on the all-time new highs list, stopped just short of an all-time peak.
However, the strength would not be across the board. On point, the tech-laden NASDAQ, the small-cap Russell 2000 Composite, and the Standard and Poor's 400, the mid-cap benchmark, all spent much of the day in the red, albeit just modestly, while advancers and decliners were in a tight band with most of the day seeing a small edge for stocks gaining ground on the Big Board than declining, while the reverse held true on the NASDAQ. All in all, it looked like a stock market that was battling some fatigue after an extended run up.
By the close, the Dow, led by solid gains in a handful of stocks, posted a 129-point gain, closing near the aforementioned new high, while the Standard and Poor's 500 Index climbed by almost eight points. However, the NASDAQ slipped back by eight points and the Russell 2000 lost more than five points, or about a half a percentage point. It was an uneven session in a succession of up-and-down days.
Once again, the fundamentals are back in vogue on Wall Street, as the economy (the leading indicators were issued yesterday for September and they showed a formidable gain of 0.7%, matching the August increase), while earnings are coming out en masse during the final late push of third-quarter reports. Overall, the tidings on both fronts have been somewhat better than expected. This is clearly helping to prop up the market as we get down to the final eight weeks or so of the year. Meanwhile, the business beat will again be front and center this morning, as the government's long-delayed initial estimate of third-quarter gross domestic product figures have just been released and they showed a much better-than-expected 2.8% advance. (A gain under 2% had been the outlook.) That was notably better than the upwardly revised first-quarter gain of 1.1%, and was modestly higher than the 2.5% April-to-June gain. A bigger test will now come in the current period, which was negatively affected by the early October partial government shutdown.
Meantime, as we look out to a new day, we find the European Central Bank has just cut interest rates to a new record low, paring its main refinancing rate from 0.50% to 0.25%, in response to inflation having fallen below its target, which is sparking fears that the euro zone's nascent economic recovery, which is not strong to begin with, could falter anew. This surprise move, which reflects a new activism on the part of the ECB, has sparked a rally in our equity futures, heretofore lower in early action. Now, in apparent response to the ECB move, the Standard and Poor's 500 Index futures have jumped to a gain of more than seven points, while the NASDAQ futures are now ahead by some seven points, as well.
Thus, with the futures climbing, the economy on our shores still responding reasonably well, and earnings largely meeting their lowered targets for the third quarter, the bull market would seem to still be in good shape, notwithstanding the fact that valuations are increasingly frothy. There is clearly greater risk than normal in the market at this time, but there still appears to be the potential for additional gains moving forward. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.