After the Close - The U.S. stock market put in a generally weak session today, extending the pullback that started several days ago. At the close of the session, the Dow Jones Industrial Average was off just 68 points; the broader S&P 500 Index was down eight points; and the technology-heavy NASDAQ was off five points. Meantime, there was some strength in the small-cap names, as the Russell 2000 spent most of the session bucking the downtrend. But, market breadth was still negative, with declining issues ahead of advancers by about two to one on the NYSE. These figures looked a bit better on the NASDAQ, and that suggests that there were some pockets of relative strength. Meanwhile, all of the market sectors headed lower today, with notable losses in the financial issues. The bank stocks were sharply lower, offset by strength in the real estate area. The basic materials group was also weak, with declines in the chemical issues. Also precious metals miners were down, as the price of gold declined almost 2%, to roughly $1,225 an ounce. In contrast, the industrial sector held up a bit better than other areas of the market, with strength in selective transportation names. Technology stocks also displayed some relative strength.
Technically, the market pulled back for the fifth consecutive day. The S&P 500 Index may find some support at 1,780, which is not too far away from the current level. However, if we move below that, the Index could test its 50-day moving average, located at about 1,750. If this should turn out to be the case, it would suggest a roughly 3.5% pullback from the recent high hit in late November. Volumes have been about average, suggesting an orderly market with no panic selling. Sentiment has turned somewhat more cautious, with the VIX moving to over 15. However, it should be noted that these levels are still low. Further, in the past the bulls have moved in to buy the dips whenever the market has weakened, and that may well turn out to be the case again.
Meantime, traders received some decent economic news today. Initial jobless came in at 298,000 for the week ended November 11th, which was much lower than had been anticipated. This along with the progress displayed by yesterday’s ADP report, likely has many traders now speculating that we will get a strong November employment report early tomorrow. While it is positive that the employment situation and economy are improving, some on Wall Street may be concerned that the Fed will change its policy, and reduce its asset purchases, as a result.
Elsewhere, traders received a favorable GDP figure today, a well. The second estimate for third-quarter GDP came in at 3.6%, which was well ahead of expectations, and further supports the idea that the economy is on the mend.
In the corporate arena, there was some news worth reporting. In apparel, Aeropostale (ARO) stock declined sharply, after that company issued weaker-than-expected quarterly results and disappointing guidance. But, Conn’s (CONN) shares were higher on a strong report. In the broad indexes, General Growth Properties (GGP) stock rose, as that issue will be added to the S&P 500. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:05 PM EST - Stocks are moderately lower today in the wake of a stronger-than-expected upward revision to third-quarter GDP. Right around the noon hour on the East Coast, the Dow Jones Industrial Average is off 46 points and the NASDAQ is down 10 points. Market breadth is clearly to the downside, as well, with the number of declining issues handily topping gainers on the New York Stock Exchange, although the trend is less bearish on the NASDAQ.
The good news is that the economy is performing better than forecast. If the strength indicated by this morning’s fresh look at nation’s economic progress in the September quarter proves sustainable, that will very likely prove to be bullish for stocks in the long run.
In the short term, though, the fear is that the Federal Reserve will be more inclined to pull back on the massive stimulus that has helped stocks achieve their record run.
Of course, nothing is set in stone. Today’s strong GDP revision was facilitated by a big inventory buildup that indicates confidence by businesses in future demand that still needs to materialize. Early indications are that fourth-quarter GDP may not be as stout as the third quarter’s, either, partly as a result of the government shutdown in early October and the recent jump in inventories.
Tomorrow’s Labor Department report on the nation’s additions to nonfarm payrolls appears set to play a role on Wall Street’s view of the direction of Federal Reserve policy. A large amount of hirings in November could send stocks further into correction mode if the predominant view is that such a showing will lead to higher interest rates.
In fact, interest rates are already on the rise, at least those of the longer-term variety. Freddie Mac reported today that the average rate on a 30-year mortgage rose to 4.49% this week, up from 4.29% a week earlier and 3.34% 12 months ago. The push higher in mortgage rates has by no means derailed the housing market, but there are concerns that still-higher rates could slow activity.
Meantime, while most stocks are following the broader market downturn, some, such as Apple (AAPL) are bucking the trend. Apple shares are trading higher on word that it has signed a deal with China Mobile (CHL) to sell iPhones. Elsewhere, Dollar General (DG) stock is also moving higher after the discounter reported strong October-period results.
Heading into the afternoon session, stocks have steadied, although there is a slightly downward bias. -Robert Mitkowski
At the time this article was written, the author did not have a position in any of the companies mentioned.-
Stocks to Watch from The Survey – Retailers are in the spotlight again today. On the bright side, shares of discounter Dollar General (DG) and menswear retailer Joseph A. Bank (JOSB) are both moving modestly higher ahead of the bell after reporting better-than-expected October-period results. However, investors were not impressed with quarterly financials and/or outlooks from apparel company Guess (GES) and teen clothing and accessories seller Aeropostale (ARO), and those equities are indicating lower openings this morning as a result. Costco (COST) stock is also down slightly in pre-market trading, after the warehouse club operator’s November same-store sales did not live up to investors’ expectations.
In other news, Regis Corp. (RGS), an owner and franchisor of hair and retail product salons, has announced a new capital allocation policy, which includes issuing $120 million in debt and a greater focus on share repurchases. As a result, management has discontinued its quarterly cash dividend. – 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, in a sense, went all over the globe yesterday, but the chief influences were clearly domestic. Of note, the market opened the session lower, found its bearings within the first hour, backtracked again into the early afternoon, and then managed to work its way back towards the break-even line near the close, finally ending the session on a mixed note, thanks to that late, and partially successful, effort by the recently chastened bulls.
Specifically, equities opened the day with modest losses, extending the several-session downdraft in the process. At its early nadir, the Dow Jones Industrial Average had fallen back some 50 points, dragged lower by further early declines in gold and the release of a report showing a much larger increase in private-sector payrolls over the past month than had been forecast. Trepidation ahead of the eagerly anticipated Beige Book summation due for release in the afternoon only added to the early angst.
But a mixed-to-better survey on new home sales and some easing in non-manufacturing activity growth helped to quell the early fears that growth was booming ahead too quickly. So, stocks stabilized for a time, and then moved higher into the mid-session. Worries about the Beige Book and its impact on the Federal Reserve, which according to many pundits, is at least contemplating a tapering in its popular bond-buying initiatives, then caused stocks to stumble anew, pulling the Dow down by some 120 points at the worst levels of the day. Then, at 2:00 (EST), the Beige Book was released, and it contained relatively few surprises. In fact, the same modest-to-moderate growth description was employed. Such an appraisal has been the case for much of this year, and the Fed has kept up its bond buying intact throughout. Armed with no additional ammunition for the Fed, therefore, the stock market again reversed course, and now began to pare those formidable losses.
In fact, as the afternoon wore on, the averages crept nearer to the breakeven line, with the NASDAQ, buoyed by some selective buying in the tech sector, notably in Microsoft (MSFT - Free Microsoft Stock Report), which hit another 52-week high, leading the way, finally moved gingerly into the plus column; the other indexes briefly followed. The basic materials issues and the gold-related stocks also firmed up as precious metals prices moved higher after an early further dip. The stock market may be overbought, and valuations are clearly extended, but there seems to be no serious move on the part of the bulls to sell en masse. So, as we moved into the last half hour of trading, the principal indexes managed to move a bit further into plus territory. By the close, though, only the NASDAQ could hold onto its positive stance, but it did so barely, gaining less than a point. The Dow (off 25 points) and the Standard and Poor's 500 Index (down a bit more than two points) headed lower once again.
Now, with such frenetic activity in the books, a new day starts with further news to ponder. Of note, the Commerce Department has just reported an upward revision in third-quarter gross domestic product growth. Initially, that metric had shown a gain of 2.8%. Another month's data and a fuller look at the period has resulted in a revision in the period's growth to a much more appreciable, 3.6%. Meanwhile, a more closely watched report, the latest government figures on job growth and the unemployment rate, is just 24 hours away. That data could have an outsized effect on trading tomorrow morning, as well as on Fed policy makers, as they get ready to meet in two weeks.
As to the latest from the global markets, stocks were lower overnight in Asia, and are struggling for direction in Europe so far this morning. Over here, meantime, the futures are now mixed with less than an hour to go before the start of the new trading day, having given back earlier gains on the much better GDP number and on a drop in jobless claims to below 300,000. The actual number, 298,000 was notably less than the 325,000 forecast. In other trends, bond yields are up a touch, while gold is now moving lower following yesterday's brief late spurt. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.