After The Close - The bull run that has taken over Wall Street remained in place today, though there was some notable selling in the last few minutes that pared the earlier gains. The latest move forward was on uninspiring volume, which may be a combination of some investor fatigue after seven straight weeks of gains and some traders getting an early start on their Thanksgiving travel plans, which could be made tough by bad weather the next few days in parts of the country.
By the closing bell, the Dow Jones Industrial Average and the broader S&P 500 were little changed. However, the biggest steps forward were taken by the NASDAQ and the small-cap Russell 2000, with the latter an indication that investors are still not shying away from adding risk to their portfolios even in a market that is clearly overbought. The latest climb also has brought some talk of another equity market bubble emerging, one built on the accommodative monetary policy of the Federal Reserve. That said, investors have shown no desire to get off the train that continues to chug along, with our sense being that the ongoing bullish sentiment, which may soon get the help of a Santa Claus rally, will be in place until the Federal Reserve begins to pull the rug out from under the market with a scaling back of its aggressive bond-buying program—whenever that comes.
Not surprisingly, given the relative outperformance by the NASDAQ today, it was another productive day for those long technology stocks. Within that space, the stocks of the semiconductor companies and the software producers fared the best. Investors should also note that the investment community’s attention will be on the technology industry after the market’s close, as computer giant and former Dow-30 member Hewlett-Packard (HPQ) is scheduled to report its latest quarterly results. In addition to the technology sector, the consumer discretionary stocks were in demand today. Conversely, investors, much like yesterday, were shying away from the basic materials and energy stocks. The latter group was hurt once again by a retreat in crude oil prices.
The day did bring some important news on the economy, with data on two very important sectors of the economy. Before the market open, the Department of Commerce reported that building permits climbed in October to their highest level in more than five years, signaling that the U.S. residential real-estate market may strengthen further in 2014. In addition, the S&P Case-Shiller Home Prices Index rose 13.3% year over year in September, the highest price increase since February, 2006. Not surprisingly, shares of the major homebuilding companies, including the stocks of D.R. Horton (DHI), Lennar (LEN), PulteGroup (PHM), and Toll Brothers (TOL), got a nice boost from the reports. It was also a big reason for the aforementioned gain in the consumer discretionary sector, despite a less-than-flattering reading on Consumer Confidence. On that end, the Conference Board reported that the Consumer Confidence Index fell to 70.4 this month, down from its revised October reading of 72.4.
Looking ahead to tomorrow, it will be a light day for both earnings and economic news, with reports on new home sales, durable goods orders, and personal income originally scheduled to be released tomorrow pushed back to next week because of last month’s government shutdown. This, along with trading volume which is expected to be light ahead of Thanksgiving and some possible portfolio rebalancing with only a day-and-half of trading left this month, could cause a spike in volatility after several consecutive nondescript trading session on Wall Street. - William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:15 PM EST - The U.S. stock market is moving slightly higher again today. As we pass the noon hour in New York, the Dow Jones Industrial Average is ahead 16 points; the broader S&P 500 Index is up two points; and the technology-heavy NASDAQ is advancing on 14 points. Market breadth is favorable, but advancing issues are ahead of decliners by a modest margin, suggesting some areas of weakness. The market sectors are a bit mixed. There are gains in the technology area, thanks to large advances in the Internet stocks. The consumer names are also putting in a strong showing, with leadership in the apparel and home improvement retailers. However, as was the case yesterday, the energy and basic materials issues are weak. The miners are down today, with notable weakness in the gold and precious metals companies.
Technically, the S&P 500 Index has been holding just above the 1,800 level. Further, many traders will likely be watching this area. Meanwhile, the market has been drifting higher lately, helped by selective buying. It should be noted that traders, having turned a bit cautious, have been rotating into different sectors with some regularity, and this has helped keep the rally intact. It also explains the mixed quality to the trading we have seen lately. Volumes have been healthy, but not been overwhelming, which is to be expected as the holiday season approaches. The VIX is headed slightly lower to 12.75, today, suggesting a somewhat bullish tone to the session.
Meantime, traders received a few economic releases today. Specifically, building permits came in at 974,000 in September, which was quite a bit better than the prior month’s figure. Also, permits rose again in October to 1,034,000, which exceeded expectations. This likely suggests that the pace of construction is picking up, and should, if all goes well, be met with ample demand. Meanwhile, it looks like housing prices are headed higher, too. Notably, the Case-Shiller 20-City Index rose by 13.3% in September, which was a bit better than anticipated. The FHFA Housing Price Index also strengthened for that month. Such news is helping shares of home builders today.
In the corporate sector, there were few earnings reports released that are worth noting. Tiffany (TIF) stock is trading higher, after the upscale jeweler posted strong results. Also in retail, things did not go as well for DSW (DSW), as that stock is off on a less impressive release. Technology is in the spotlight, too, as Hewlett-Packard (HPQ) is set to report its quarterly figures later 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: Although many on Wall Street are looking to get an early start to the holiday, there are a handful of companies slated to report earnings this morning. In fact, today is expected to be the busiest day of the week in terms of earnings releases. Meanwhile, the investment community will likely also be keeping close tabs on consumer confidence data that is expected to be released later in the day.
On the corporate front, shares of luxury jewelry and accessories maker Tiffany & Co. (TIF) are worthy of keeping an eye on after the company posted strong third-quarter results and upped its share-earnings guidance range by $0.15, to $3.50 to $3.65. These shares have traded up notably before the bell. Elsewhere, food maker Hormel Foods (HRL) said that profits jumped 19% thanks to the recent acquisition of Skippy. However, guidance was nothing to write home about, with the company suggesting that higher beef input costs are a concern. It will be interesting to see how investors handle the news as they have shown little interest in the stock so far this morning. Others set to report are investment management and consulting firm Eaton Vance Corp. (EV) and bookstore operator Barnes & Noble (BKS). Computer maker Hewlett-Packard (HPQ) will report after the market closes.
Meanwhile, it will be interesting to see how Wall Street reacts to news that China’s regulators are looking into mobile chipmaker Qualcomm Inc. (QCOM) for allegedly breaking antitrust laws. The stock has seen a little resistance this morning with some presumably fearing that the investigation may hamper the company’s expansion efforts. - Andre J. Costanza
At of the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - It was a largely uneventful day on Wall Street yesterday as we started the holiday shortened week that will feature a Thanksgiving pause to trading on Thursday and just a half day's worth of action in the U.S. equity markets on Friday. Many traders will likely take a four-day weekend, and even get the ball rolling early on Wednesday, so volume figures to be comparatively light throughout the week.
As for yesterday's trading, the new week got off on a quiet note, although we did see the Dow Jones Industrial Average advance for most of the day before a mild selloff clipped the gains somewhat late in the session. In between, that 30-stock composite blue-chip composite managed to ascend the 16,100 level for the first time ever, while the other large-cap, but more broadly configured, Standard and Poor's 500 Index pushed a bit further above the 1,800 market during the day, before it, too, weakened into the close. At the same time, the NASDAQ, which is not near an all-time high, still managed to push above the 4,000 level briefly. In the end, though, the market turned somewhat mixed, with the S&P Mid-Cap 400 joining the S&P 500 Index in the red, while the small-cap Russell 2000 Composite shed ground grudgingly in some overdue modest profit taking. The Dow and the NASDAQ, however, were able to hold onto slim gains into the close. Importantly, for those putting stock in round numbers, the Dow remained above 16,000 with its eight-point gain, while the S&P 500 Index held just above 1,800 with its two-point decline.
Contributing to the market's early strength was some carryover from last week's succession of record closing highs, as well as early optimism in some circles regarding the West's nuclear deal with Iran. Although questions will linger for some time as to the ultimate value of that accord, the early votes on Wall Street were mostly positive. On point, the seeming reduction in tensions caused oil prices to fade further, while gold sold off anew, dragging down some precious metals shares early in the day. Outside of this global development, the only news of note on an otherwise quiet day was a report showing a small retreat in pending home sales.
Looking ahead, we will have a succession of key reports being issued in the days ahead, highlighted this morning by data from the Conference Board survey on consumer confidence for November, where a small additional drop is expected. Tomorrow, we will get reports on initial jobless claims, orders for durable goods, manufacturing data from the Chicago purchasing managers, and a consumer sentiment survey from the University of Michigan.
As to other news, third-quarter earnings season for the nation's retailers is winding down. Overall, this group has turned in a mixed performance for the period. Looking ahead, the uneven sales showing in recent weeks could well presage an undistinguished buying pattern during the coming Christmas shopping season. Our sense is that with several fewer shopping days this year than last, due to the late arrival of Thanksgiving, the nation's retail chains may only book modest volume gains. With bargain sales a way of life for so many retailers throughout the year, there may be less incentive to bunch the shopping up into a short several weeks.
Meanwhile, as we have noted repeatedly in recent weeks, the stock market's valuations, albeit not wholly out of line with reality, are still somewhat extended. That does not mean the coming weeks and months will see some overdue profit talking, as market's can stay frothy for weeks and months at a time, just as they can remain undervalued for long stretches as they did during the long bear market a half decade ago. That said, at some point, the stock market will sell off; it just does not seem as though this is the point. However, we note that just as no one rings a bell as market bottoms, no one bangs the gavel at market tops.
That said, in the market overseas this morning, prices are generally lower, but they are pointing to a modest gain on our shores when trading commences in less than 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.